Nothing can be taken for granted when it comes to superannuation and aged pension policy.
Do you know how much money you need to maintain the standard of living you’re used to when you retire?
According to the latest Association of Superannuation Funds of Australia (ASFA figures), a couple currently aged 65 wishing to live a comfortable lifestyle need an annual income of $58,444 – and under the current age pension assets test framework that means they’ll need a joint superannuation balance of at least $510,000.
However, nothing can be taken for granted when it comes to superannuation and aged pension policy. Recent industry discussion about changes to aged pension entitlements and the potential to reform superannuation tax concessions means it’s more important than ever to ensure you are financially self-sufficient for your future.
Why are changes required?
As the Government’s 2015 Intergenerational Report highlighted, Australians are living longer – and this will place increasing unsustainable pressure on our aged pension system. By 2055, the average woman in Australia will live to 96.6 years and men to 95.5, and the gap between life expectancy and the age of pension eligibility is widening. Meanwhile, the proportion of people aged over 65 will continue to grow.
There are several ways to address this. First, it is likely Australians will continue working for longer. Government policy is also likely to continue to encourage more people to be self-funded retirees – while making changes to the system to ensure it is fair for all.
Minor moves for the greater good
While the 2015 Federal Budget avoided ‘tinkering’ with the superannuation system, it did announce stricter asset testing to determine eligibility for the age pension. Now, retired couples with more than $823,000 of assets (excluding the family home) will no longer be eligible for the government pension, and others will have their part pension cut. This means those affected may need to make sure they top up their super – or delay their retirement.
It’s a clear sign that people are expected to take control of their own financial future, rather than depend on public support.
Your superannuation is still the best way to save for retirement, and it will continue to benefit from attractive tax concessions. It may be worth considering putting extra money into your fund to benefit from the effects of compound growth, and new measures to make it simpler to find lost super should help consolidate accounts to reduce costs.
The budget changes will not kick in until January 2017, so there’s still time to re-think your retirement strategy. And if you’re thinking about changing your goals, it’s a good idea to talk with your adviser first.