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Blog | Retirement Income Policy Review

Chris Morcom
Partner/Private Client Adviser
29 May 2019

On Friday last week, it was interesting to read the Treasurer’s predisposition to conducting a review of retirement income policy.

This is in line with the Productivity Commission’s recommendations, which are calling for an independent assessment of the compulsory superannuation system that was established some 27 years ago.  A key objective of this system is to increase private savings, in turn increasing national savings and taking the pressure off the government budget.

The commission also wanted to explore if any reduction in reliance on the government pension helps the federal budget, given the tax breaks provided to those who have the capacity to maximise their superannuation contributions.

Interestingly, the commission also wanted to see if compelling workers to forgo a portion of their salary in favour of deferred superannuation savings benefits the poor and wealthy fairly.

While conducting a review of the system is important to ensure it is indeed meeting its objectives, this last point seems to be off the mark.

It seems relatively self-evident to me that higher income earners would benefit more from the superannuation system given they are more likely to accumulate more in superannuation and be less likely to receive a government old age pension.

Likewise, it is more likely that those on lower incomes will benefit less from superannuation, as they cannot afford to make additional contributions while working.

In my view, the current system is well balanced.

Those who can afford it and are able to contribute more into their superannuation are incentivised to do so.  But there is now a limit of $1.6 million that these contributors can accumulate in a tax-free superannuation retirement pension.

Those who cannot accumulate enough in superannuation to support themselves continue to have access to the government’s age pension.

The superannuation system seems to be working reasonably well now and is still maturing.  The 9%+ superannuation guarantee rate has only been in place for 17 years.  Someone aged 20 starting work back then conceivably still has another 28 years to work until they reach 65.  I can only hope that those reviewing the system recognise the relative youth of the system and how it is far from maturity.

For those wondering how on earth they should approach their superannuation given the seemingly constant government reviews and tinkering, I suggest the following:

  1. Superannuation remains the most tax effective structure in which to hold and accumulate assets that will provide you with an income in retirement
  2. The $1.6 million limit now means those who are on target to accumulate more should consider alternatives such as investing outside of the superannuation system, which would provide a level of protection against future rule changes
  3. Start saving early towards providing for your retirement as the burden is spread across many years and you get to benefit from the “magic” of compound earnings

For those who are not sure whether they are on the right track, advice can be invaluable.  If you would like to speak to one of our highly qualified advisers, please click here to make contact or request to meet.


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.