How the latest batch of superannuation changes affect you
A new round of superannuation rule changes have passed through parliament and another review is under way, and a majority of Aussies are unlikely to be aware of them.
If you blinked, you might have missed them.
Fresh changes to superannuation are under way, and they have the potential to make you richer.
However, a majority of Aussies are unlikely to be aware of this latest round of tweaking and what it means for them.
Anyone who’s kept half an eye on super over the past couple of decades would know that the rules get changed more often than underpants.
But that doesn’t mean super should be ignored. It’s the second-biggest asset for most people after their home, and is increasingly becoming the largest asset for the millions of Australians who don’t or won’t own a home.
Changing the rules will change their wealth — hopefully for the better.
Here’s a rundown of the two key moves made in recent weeks.
INSURANCE SAVINGS
First, we’ve had the passing through parliament of the Putting Members’ Interests First legislation, designed to stop the gnawing away of nest eggs by unnecessary life insurance premiums in super.
From April next year, anyone aged under 25 or with less than $6000 in a super account won’t automatically receive insurance cover in that account, and instead will be required to opt in.
This will stop people from losing many thousands of dollars over a working lifetime from insurance premiums charged by multiple low-balance super fund accounts.
Life insurance is important but you’ve got five different super funds all slugging you with premiums, that money will never have a chance to compound over time and grow into something spectacular.
By eliminating unnecessary insurance premiums in funds that people probably don’t even know they have, the members will benefit big-time over the long term.
RETIREMENT INCOME REVIEW
Not another bloody government review, you might say.
But this one is going to be important for all of us — from pensioners to self-funded retirees to everyone in between.
On September 27 the Federal Government outlined its review that will examine compulsory superannuation, the age pension and voluntary savings including home ownership.
It’s got a tight time frame, with the final report to be delivered to the Federal Government within nine months, and already has sparked political arguments about the panel appointed to undertake the review.
The real disappointment since the review was announced has been more calls from superannuation critics to abandon the planned rise in compulsory super payments to 12 per cent of wages, and to again suggest that super should be made voluntary for low income earners.
Their argument that giving workers that extra 9.5 per cent in wages rather than retirement savings is based on a misguided belief that those with smaller super balances won’t benefit from having any extra retirement money on top of the age pension.
Even if they are full pensioners, an extra $50,000 or $100,000 nest egg is enough to pay them an extra $100 a week for many years.
That may seem like small change to the Coalition politicians and other critics who want their super scrapped, but it means a hell of a lot to retirees who have little else in the way of wealth.
Originally published as How the latest batch of superannuation changes affect you
