Super funds have vowed to fight the federal government over yet more proposed changes to super.
The Federal government is considering plans to start taxing superannuation payouts on accounts with balances of over $1 million, in a bid to shore up its budget.
With super tax concessions expected to cost the government $45 billion in 2016, perhaps it’s no wonder that the government has its eyes on that sector.
The extra tax would be limited to wealthier individuals with very large super nest eggs.
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More changes means confidence in super as a retirement system is at an all time low, according to Andrea Slattery, chief executive of the Self Managed Superannuation Fund Professionals Association (SPAA). “The continued reduction in superannuation concessions is damaging the effectiveness of super as Australia’s key retirement savings vehicle,” Ms Slattery has told The Australian.
Almost 1 million Australians now invest in around 460,000 self-managed super funds, with assets worth more than $460 billion.
That’s over 30% of the $1.4 trillion invested in super, and more than the $387 billion invested through retail funds offered by the likes of AMP Limited (AMP.AX), BT Investment Management (BTT.AX), Perpetual Limited (PPT.AX) and Platinum Asset Management (PTM.AX).
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Investors are reportedly looking at other strategies to provide for their retirement, thanks to a raft of changes and upheaval to the super system in recent years.
Caps on contributions mean $15 billion less is being contributed to super, according to Ms Slattery. People over the age of 50 used to be able to contribute up to $100,000 a year into their super, without being hit with excess tax, but that limit was dropped to just $25,000 in 2009.
So where has that $15 billion gone?
Ms Slattery reckons the low super caps are leading consumers to spend rather than put the funds into super – possibly one reason why sales of new cars have passed 1 million vehicles a year.
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It may also be the reason that the big four banks can now rely on term deposits for around 60 per cent of their funding requirements, as investors leave their funds in the bank, rather than transferring it into their super fund.
Australia's super among world's largest
Australia’s $1.5 trillion in superannuation assets is now the fourth largest in the world, according to a new study.
It’s even bigger than our economy, but sits behind the US with US$16.9 trillion, Japan with US$3.7 trillion and the UK with US$2.7 trillion, and just ahead of Canada’s US$1.48 trillion in pension fund assets, according to a report by Towers Watson entitled Global Pension Asset Study 2013.
An estimated $60 billion flows into the super pool each year, thanks to compulsory super.
According to the report, more than half of that $1.5 trillion is invested in the stock market, 15% is allocated to bonds, 8% to cash and 23% to other assets, such as real estate, infrastructure, hedge funds etc.
Self managed super funds make up a rapidly growing 30% of that with $460 billion, more than the $387 billion invested through retail funds. The remainder is made up of corporate and industry super funds.
Almost 1 million Australians now invest in around 460,000 self-managed super funds, with the number growing thanks to fund managers’ overall inadequate out-performance, and falling markets post the GFC (although in 2012 the Australian market posted a decent 19% return, including dividends).
Many people believe that they can beat the fund managers at their own game, and there’s absolutely no reason why they can’t.
With 1-1.5% of that $1.4 trillion paid as fees, the industry creams off between $14 billion and $20 billion each year, split between fund managers, financial advisors, and other so-called intermediaries. No wonder then that Australia has so many retail super funds, each trying to score a piece of the $1.4 trillion cash cow.
More changes to the super system appear could result in more people becoming reliant on government pensions in future, because their super balances aren’t enough to sustain their retirements. It could also mean more funds are paid to financial advisers, as the system becomes too complex for ordinary Australians to manage themselves.
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