Super proposal gets backing but reform required

40 per cent of Australians earning between $30,000 and $50,000 would participate in the Government’s proposed $3 for $2 superannuation co-contribution scheme, according to research commissioned by theInvestment and Financial Services Association(IFSA).

The study by strategic research group Eureka estimates that 42 and 41 per cent of individuals that are aware of the scheme and earn between 30,000-40,000 and 40,000-50,000 respectively would make personal contributions to their super.

These figures compare to 20 per cent of this lower income group and 25 per cent of those earning between $40,000 and $50,000 that currently make personal contributions to their super, the latter of which are not covered under the existing co-contributions scheme.

“The extended Co-contributions will allow Australians to tailor their retirement savings more effectively to suit their own needs and circumstances. This is particularly helpful for people with broken work patterns, particularly women, and those who feel that their compulsory savings alone will not fund an adequate retirement income,” IFSA chief executive Richard Gilbert says.

Meanwhile a collection of academics representing various institutions including the University of New South Wales, the Royal Melbourne Institute of Technology and the University of Western Sydney (UWS) will meet later this week to discuss what is required to reform the superannuation system.

UWS economics professor Tom Valentine, believes the Government should stop ‘tinkering’ at the fringe of superannuation reform, and calls on both sides of politics to face up to the growing demands of an ageing population.

“Recent reforms have fallen well-short of the fundamental changes that are desperately needed to fix the nation's retirement savings policy,” Valentine says.

He suggests three key changes to the system would make it more user-friendly, and encourage future generations to build a better nest egg for retirement.

“Firstly and most importantly, an urgent overhaul of tax on retirement savings is needed. Australians are the only nation in the world to pay tax three times on their superannuation. At present we pay a 15 per cent contributions tax, a 15 per cent tax on super earnings, and a final 15 per cent tax on lump sum payments.”

Valentine argues in addition to the taxes, the level of fees charged by super funds and the increasing complexity of the system must also be addressed.

“Meeting the demands of an ageing population is going to become an increasingly vexing issue for successive governments.

“While superannuation will reduce the burden on the public pension system there's a real need for fundamental changes that will help support the super system so retirees aren't left facing a welfare crisis,” he says.