Well it seems the current government may well have some new taxes in store for retirees and super funds after the next election.
Treasurer Joe Hockey has refused to rule it out, as has assistant treasurer Josh Frydenberg, which goes against the Coalition's hardline stance of 'no new taxes' and 'no negative changes' to super.
Bringing in some taxes on superannuation incomes for retirees appears likely, as the government seeks to address its falling revenues and a perceived problem that rich retirees are benefitting from not paying enough, or in some cases, any tax.
But as Prime Minister Tony Abbot told parliament this week, "We have no plans for further taxes on superannuation beyond this term of Parliament because we do not believe that the people's savings are a piggy bank to be raided by government whenever it is in trouble."
Last week Mr Hockey said there would need to be an inquiry into retirement incomes at some stage. Labor, on the other hand, has announced it will impose a 15% tax on the super income of retirees on all earnings over $75,000. The Opposition has also announced plans to tax contributions to super for those on incomes over $250,000 at 30%, down from the current level of $300,000.
Then we also rumblings that the government doesn't want us to enter retirement with large sums of superannuation. In the last budget, the government has proposed changes to assets testing and reduced the thresholds to qualify for a part pension.
There are also proposals to end the payment of lump sums when we retire, to stop retirees blowing the lump sum as soon as they retire, and then fall back onto the pension afterwards.
So is it time to give up on super?
The emphatic answer is No. Superannuation is still a highly-effective way of accumulating retirement savings and still has substantial tax breaks. Even if the government imposes a tax rate of 15% on income over $75,000, most retirees still won't pay a cent in tax, given our low superannuation savings.
Retirees face a bigger problem and that's not having enough super to provide for their whole retirement. The problem is that the older we get, the more likely we will need expensive medical care, and the more money we will need. It's wouldn't be great to be forced to depend on the pension in your latter years, after self-funding the early part of your retirement.
So what should we do?
It's quite simple really.
Make sure you have investments in assets both inside and outside super that you can rely on when you retire. That gives retirees the flexibility they may well need in retirement and also minimises the impact of new taxes or rules on super income. It's also important to realise that the government wants the superannuation system to support as many of us in retirement as possible, so it's not going to make it so unattractive we avoid it.
The other thing you can aim for is to be self-sufficient, so you don't need to rely on a part or full pension during retirement. Yes, you might have to pay tax, but the amount is likely to be quite low anyway.
