Mercer has released a proposal to introduce lifetime concessional contribution caps for superannuation that can be rolled over from year to year in the event they are not fully used and applied in the following years.
At present concessional contributions are capped at $25,000 per annum. However Mercer suggests that in the event that an individual does not use this amount, half of the unused amount could be rolled over into the next financial year, allowing a higher limit in succeeding years.
Mercer senior partner David Knox said the group was also proposing that the accrued roll-over contribution should not exceed three times the annual concessional cap, effectively capping it at $75,000 in any single year.
The Association of Superannuation Funds of Australia has already proposed a soft target for lifetime concessional contribution caps of $1 million, but Mercer claims its model is the first to propose how lifetime caps would operate in practice.
Knox said the proposed system takes into consideration broken working patterns and different earning potentials of people across their working lives and allows them to place more into superannuation in those periods when they are able to do so.
"The proposal is a mid-way point between the level of the cap at present and calls to lift it to a much higher level across the board. If people are unable to place $25,000 in super earlier in their working life, this gives them credits to do more later and does not penalise them but allows them to catch up on their super savings," Knox said.
Knox said the proposal, if adopted by the Federal Government, should not be retrospective because of the amount of data that would have to be processed but could easily be implemented going forward.
"It would not cost Government anything to implement this year because the base for everything would still be $25,000 and the Australian Tax Office could collect the relevant data going ahead to implement the roll-over function," Knox said.
"With this proposal we are trying to present superannuation as a lifetime earnings and savings tool and not a year by year event which it has become for many."
Knox said Mercer would meet with industry associations and the Federal Government after the election to promote the proposal.
