Q&A: Pension and super changes — how to optimise your situation

How will you deal with the big coming changes to super? Wealth Editor James Kirby has answered your questions.

A double challenge is looming in new retirement rules.

Australian investors face a double challenge over the coming months as two completely different sets of retirement rules get introduced. On January 1 the new rules for pension access will be applied, and those reforms will be followed on July 1 by the new rules which govern the taxation of both contributions and retirement income ... it’s the biggest change we have seen in more than a decade.

Nevertheless, with only weeks to go before this complex overhaul of the system gets underway there is widespread confusion among both professionals and investors — that’s why The Australian will has hosted a live Q+A for subscribers on Wednesday, November 2, at 12.15pm to cover all your questions on super.

Wealth Editor James Kirby has answered your questions submitted in the comments section below, with questions taken on a range of wealth issues.

The first batch of super changes — relating to pension access — were already detailed in the May Budget earlier this year. The second batch of changes — relating to contributions towards retirement and income during retirement — remain in draft legislation but are widely expected to get passed with little changes.

It is estimated more than 300,000 Australians will have their superannuation benefits reduced with the changes due on January 1. The plan is to increase the penalties in the super system for those with significant personal assets.

Just to give one example, home owning couples this year can still have assets at up to $1,178,500 and retain access to a part pension without penalties: from January 1 the new asset tests slices that figure back to a lower limit of $816,000. Moreover, the penalty rate for those with assets exceeding the limit doubles from $1.50 for every $1000 over the limit, to $3 for every $1000 over the limit.

Even bigger and more complex (is that possible?) changes come into effect six months later on July 1, when a new system that caps contribution tax benefits and puts a limit on tax free retirement income gets introduced. The new arrangements will doubtless be matched by a selection of alternative plans put forward by fund managers and advisers who will try to answer calls from frustrated investors.

“The conversation we are having with many people is that they simply don’t trust super anymore and they’re looking for alternatives that can offer same asset protection and safety net to future-proof their incomes’ says Murray Howlett, tax partner at Pilot Partners.

**

Please note this is a general advice forum — we are not offering personal advice of any kind. James has endeavoured to answer as many questions as possible in the time frame permitted with a view to helping as many subscribers as possible.

We are planning to produce a series of similar subscriber-only sessions on investment issues that matter to you, and these will be promoted on www.theaustralian.com.au over the coming weeks, so stay tuned. We also cover these topics regularly in the Wealth section.