Planners made busy by super changes
Financial planners will be made busy unravelling the complexities of the Government's recently passed Budget superannuation changes, and particularly managing investments outside of superannuation, according to actuarial consultancy, Rice Warner.
In an analysis published this week, Rice Warner has predicted an increased workload for financial planners resulting from the Budget, with the increased use of investments outside of superannuation encouraging more people to make financial decisions on a whole-of-wealth basis.
It said the changing environment gives financial planners the challenge — and opportunity — to help their clients to:
- Manage savings as a family — couples co-ordinating their plans have improved chances of being able to make catch-up contributions tax effectively after a career break to look after young children;
- Deal with greater complexity — the super tax changes have not only increased the complexity of super, but have also increased the range of structures and strategies that should be considered; and
- Make decisions on a whole-of-wealth basis, not just in product silos. When considered as a whole, investments held by Australian households outside super have comparable financial significance to the super system.
Looking at the new settings, the Rice Warner analysis said that for those who were fortunate enough to need to consider the caps, and have partners, managing super as a couple had become even more important than before.
"A wealthy couple could retire with up to $3.2 million in tax-free pension accounts by accumulating their super reasonably evenly. Previously, it did not matter how super was divided between a couple — so long as the relationship stayed together!"
"Decisions on the optimal mix between super and other financial assets become more complex, and more important. For example, someone retiring with super of $2 million and no mortgage could previously have kept it all in a tax-free account-based pension account. Following the changes, the account-based pension is still the natural home for $1.6 million, but where should the other $400,000 be invested?" it asked
"A super accumulation account would involve tax of up to one per cent — which could compare favourably with holding the assets directly if returns are taxed at 49 per cent. However, someone without other taxable income holding the $400,000 directly will pay little or no tax on their investment earnings outside super. So, they may prefer to move the money out of the accumulation account."
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