2019-10-22 09:49:071970-01-01 00:00:00

Retirement Income Review

The plan for retirement income system review

Treasurer Josh Frydenberg is considering engaging a review of the retirement income system, including the interaction of superannuation, age pension and taxation on super contribution and payout, to check whether or not it is a good idea to go from 9.5 to 12 percent.

The review was recommended by the Productivity Commission. Mr Frydenberg stated it was “clear” from both the Productivity Commission and the Royal Commission findings “that there is a strong case for reform to strengthen accountability and the overall efficiency of the system”.

It would be a “good idea”  for the Morrison government to conduct an independent retirement income review to work out how the super and pensions could better link together, said Jeremy Cooper, who led the Rudd government’s narrower superannuation inquiry a decade ago

Retirement income streams such as annuities and the super tax concessions and pensions could be examined once the Morrison government gives broad terms of reference to the mooted review.

Anxiety among superannuation industry

Superannuation executives, however, are anxious Josh Frydenberg concealed real intentions at halting the scheduled rise in compulsory super contributions to 12 percent beneath the scheduled review of the retirement income system.

The consensus among most economists and super executives is that higher super contributions are traded off for lower wage increases in enterprise pay negotiations. According to the Grattan Institute’s report,  increasing superannuation guarantee to 12 per cent of wages will decrease Australian workers $20 billion a year in take-home pay and worsen dull wage growth.

Grattan’s John Daley said a review should calculate the net costs and benefits of the retirement income system, including super tax breaks, pension payments and impact on overall national savings levels. The planned rise in the compulsory superannuation from 9.5 percent to 12 percent will also cost the federal budget an extra $2.5 billion a year in forgone income tax revenue from 2025, for tax on concessional super contribution is 15 percent, which is less than the marginal tax rate of most employees’ wages.

Superannuation industry executives are also nervous for the reason that the conservative side of politics has been consistently cautious about the superannuation guarantee (SG) system set up by former Labor treasurer and prime minister Paul Keating.

Both parties support for going to 12 percent. The Morrison government’s official position is supporting the scheduled rise, but Liberal prime ministers John Howard and Tony Abbott both delayed increasing compulsory super contributions. Labor firmly supports the rise to 12 percent.

Martin Fahy, the chief executive of Association of Superannuation Funds of Australia(ASFA), said superannuation had faced 24 government reviews over the past decade, and another review would further reduce member confidence in the retirement savings system. Some executives claimed this planned review as a “stalking horse”.

Eva Scheerlinck, The Australian Institute for Superannuation Trustees (AIST) chief executive, said that “We will continue to strongly advocate for policies that improve the fairness and sustainability of superannuation for all Australians, which includes a commitment to raising the SG to 12 per cent as scheduled.”

Scheerlinck also said that the Government needed to be “focussed and committed” to the smooth implementation of recently legislated policies, such as the Protecting Your Super reforms, to ensure that the best outcomes for super fund members were achieved.

Interactions between super and pension

The Association of Independent Retirees said retirees required certainty and safety of planned retirement funds, “especially those who rely on modest investment income and don’t qualify for the age pension”.

The main point of compulsory superannuation was that it reduced the numbers of retirees who rely on the government pension, but a large amount of tax breaks now given out to super payments could be cancelling out this effect on the federal budget. Compulsory super could also currently be harmful to the poor by depriving them of income that could immediately be used for necessities and be beneficial to the wealthy by offering tax breaks on superannuation.

Another drawback in the system of compulsory superannuation savings is that lower-income earners who save more superannuation for retirement can lose almost the same amount they are entitled to from the age pension as retirement funding sources.

A review, accordingly, may consider pension rules, such as the Assets test, which exempts the main residence(your principal home), the Income test and diminishing rates for when the pension is gradually reduced for certain income and asset levels.

By Frank Zhang

Click here for a 7 days access to our Lotus Blue Portal.

KOSEC does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information provided. KOSEC is intended to provide general information only. Please be aware that investing involves the risk of capital loss. This message is confidential and may be privileged. It is intended only for the use of the addressee named above. If you are not the intended recipient, any unauthorised dissemination, distribution or copying is illegal. We do not guarantee the security or completeness of information hereby transmitted and are not liable in either respect or in respect of any delay. Nothing in this message is intended as an offer or solicitation for the purchase or sale of any financial instrument. Any market prices or data, unless specifically verified and identified as such, are not warranted as to completeness or accuracy. Kodari Securities Pty Ltd (KOSEC) is a Corporate Authorised Representative (No. 399 556) of Longhou Capital Markets (AFSL No. 292464) which is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC wishes to disclose that KOSEC and its staff may hold stock they recommend in their own portfolios and that any decision to purchase recommended stock should be done so after the purchaser has made their own inquires as to the suitability to their own requirements. Click here to view our FSG.

KOSEC Terms & Conditions

Kodari Securities Pty Ltd (CAR 399556) trading as KOSEC is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC is a financial services company and any information provided by its platforms, portals, reports and documents is protected by copyright. Any unauthorised production of this information is prohibited.
KOSEC reserves the right to change or remove any information provided on our website, reports or any documents including these terms and conditions at any time without notice. The change or modification to the terms and conditions will be effective immediately upon posting an updated version on our website, necessary platforms and documents. It is recommended that you review the information provided on our website, including these terms and conditions frequently for any changes.

Disclaimer
KOSEC provides general advice only. The information provided is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. KOSEC recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Please make sure you read our Financial Services Guide (FSG).

KOSEC does not guarantee any returns. Past performance of any product discussed is not indicative of future performance. (We urge that caution should be exercised in assessing past performance. All financial products are subject to market forces and unpredictable events that may adversely affect their future performance). Investing in the stock market can incur huge losses. Please also be aware that fees will incur on every transaction regardless of the performance of your investments or returns generated. Employees and or associates of KOSEC may hold one or more of the stocks, securities or investments reviewed by the company.

Your use of information from our website, reports, documents and from talking to our representatives/associates is at your risk. Under no circumstance should the investment be based solely on KOSEC information and general advice. You should seek professional financial planning advice.
KOSEC aims to maintain the accuracy of the data and information provided on this website, by using information prepared from a wide variety of sources, which KOSEC to the best of its knowledge and belief, considers accurate and does not make any representations or warranties of any kind, expressed or implied, about the completeness, accuracy, reliability, suitability or availability of the information provided.

We may at times refer to third parties, which the details of these third parties have been provided solely for you to obtain further information about other relevant products and entities in the market. KOSEC has no control over the information third parties have, or the products or services offered, and therefore make no representations regarding the accuracy or suitability of such information, products or services. You are advised to make your own enquiries in relation to third parties. Our inclusion of any third party content is not an endorsement of that content or the third party.

Fees
As a client you will be charged a yearly service fee and a set brokerage fee per transaction. Your service fee will automatically renew at the end of your agreed 12 month period at the same rate advertised at the time. Your credit card or bank account will be charged for a further year following which will again auto renew until you cancel your yearly service fee. You can cancel the auto renewal at any time in advance of the renewal date by contacting us. KOSEC is aware of the need to ensure the security of your credit card details and our payment systems are compliant with the Payment Card Industry (PCI) Data Security Standard.

Privacy
You consent to receiving email correspondence from KOSEC, as well as companies KOSEC has an association with. These emails will be sent by KOSEC and third party companies. You can opt out of receiving any category of emails at any time by contacting us. We may from time to time inform you of special offers, or even ask your opinion of the services we provide, but your involvement is optional. Should you request us to do so, we will archive your details.

Indemnity and Liability
You indemnify KOSEC from all claims or threatened claims, suits, demands, damages, costs as well as including legal costs incurred in dealing with any threatened claim, expenses made by any person or corporation against KOSEC and any other amounts which is caused by KOSEC providing information, execution and General Advice.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from a decision made by you on the basis of information obtained through the use of our portal, reports, documents or any General Advice given and any transaction taken place.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from delays in executing orders for the client and acknowledges KOSEC makes no guarantees about the time taken to execute an order on behalf of the client. You acknowledge that KOSEC relies on third parties in providing technology and release KOSEC from any harm, loss or damage you may suffer as a result of the failure of such information technology.

Cookies and Links
KOSEC website, and its portal uses cookies, which lets us identify your browser while you are using the site or our portal. Cookies do not identify you personally. They simply allow us to track your usage patterns. If you prefer not to receive cookies, you can configure your browser to reject them or to notify you when they are being used. The functionality of the KOSEC website may be impacted if you restrict the use of cookies.

Fill up the form below and we will get back to you as soon as possible.

CLAIM YOUR FREE E-BOOK &
7 DAY ACCESS TO LOTUS BLUE

STOCK MARKET SUCCESS

KOSEC’s CEO, Michael Kodari’s new book, “Stock Market Success” valued at $39.95, available at Dymocks book stores with all the proceeds going to Dymocks Children’s Charities.

CLAIM YOUR FREE E-BOOK WHEN YOU LOGIN TO LOTUS BLUE INVESTMENT PORTAL

Latest TV Commercial