Superannuation changes target ‘fairness’ not independence

On Thursday, superannuation expert Jeremy Cooper tweeted that “the super concessional cap changes are about tax and tax alone. They do not stop people saving or (in 99% of cases) putting money into super.”

This is similar to the government’s claim that 96% of people are no worse off under the changes.

The trouble is that the tax concession debate should be a side line to the key problem with superannuation — the fact that so few people are able to support themselves in retirement off welfare — and the budget did basically nothing to help bridge the gap.

The government has lowered the threshold on the higher contributions tax rate, limited the amount of money that can be held in a tax free retirement account, capped lifetime non-concessional contributions, and lowered the annual concessional contribution limit. These initiatives are clearly just revenue raising. 

They have also committed to a low income super tax offset, increased spousal transfers for low income spouses and allowing people on lower balances to roll-over unused concessional caps.

Whether or not you approve of these initiatives, from the perspective of self-sufficiency in retirement they clearly target the wrong group. People on low incomes throughout their working lives are invariably going to be on the pension for all or most of their retirement. Most would be better off free from compulsory superannuation altogether.

The budget needed to target incentives at those earning around and slightly above average income. With the right help they could be weaned off welfare, and we might finally combat unsustainable pension spending.

The government agreed that the purpose of superannuation is to supplement or supplant the pension. It would be good if their reforms had the same purpose.