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Hands off our nest egg: superannuation reform

Nathan Lear
Partner/Private Client Adviser
30 Mar 2015

The Federal Government last week announced that it is considering amendments to legislation around how individuals can draw down on their superannuation entitlements in retirement phase. Among the suggestions, it is considering preventing Australians access to their superannuation via lump sums, instead limiting access to a structured self-funded pension.

As highlighted in the recent Intergenerational Report, our social security system will face increasing pressure in future years due to our ageing population. The argument behind the shift from a lump sum payment is that Australians should not be left to their own devices with a pot of superannuation money when they retire.

However many Australians make voluntary contributions to superannuation in the accumulation phase, over and above their employer’s mandatory contributions which is currently 9.5 per cent of their salary. They make the conscious decision to defer access to part of their salary, with the understanding that they will use this money to fund a more comfortable and secure retirement.

Therefore, I would argue that it is not fair for the Government to then tell Australians how much super they can withdraw in any given year during retirement.

As an example, assume an individual made the decision to salary sacrifice a large chunk of their salary to superannuation in the years leading up to their retirement, to make use of tax concessions. This person may have made this decision with a view to take a lump sum withdrawal earlier in retirement to repay a certain level of debt. If this proposal came into effect, this person may be in a position where they have to fund loan interest payments in retirement. This is not ideal, especially if they have sufficient capital within their superannuation fund(s) that could be used to exhaust this debt.  

My concern is that Australians may reconsider accumulating wealth via superannuation if the Government was going to control how they access it when they retire, instead looking for alternative avenues to build wealth. The sustained uncertainty around superannuation policy undermines long term confidence in the system which may discourage Australians from making the necessary voluntary super contributions, resulting in a lower balance come retirement. 

Or, more alarming is if Australians choose not to plan for retirement at all, hence putting further pressure on the Age Pension and social welfare system.

Once again, this discussion around superannuation highlights how important it is for Australians to seek financial advice. At Hewison Private Wealth, we provide advice to clients on the most effective strategies to use to manage their retirement benefits in the drawdown phase and throughout retirement. 

The information provided above is general information only and individuals should seek specialised advice from a qualified financial adviser. Please contact Hewison Private Wealth for more information. 

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.