Superannuation to get a shake up

More changes to superannuation likely

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There could be more changes to super coming, with Superannuation minister Bill Shorten suggesting that compulsory super is failing to provide enough support to retirees.

There is also speculation that the Federal government will target superannuation tax breaks as a means to meet its forecast for a budget surplus.

An estimated $30 billion in tax breaks have failed to take the pressure off the aged pension, according to CPA Australia. The Association has called for the government to look at placing limits on lump-sum withdrawals from super, as retirees use it to pay off their mortgages and go on overseas holidays, before drawing down the age pension.

The report suggests that people nearing retirement are sharply increasing their debts, with mortgage and property debt levels more than doubling since 2002, while those in the 50 to 54 age bracket were following the same path. Then as they retire, lump sums are being drawn down from super to pay off those debts.

The Association has suggested all the government is doing is effectively funding a $30 billion per year tax concession that will do little to support retirees, and place pressure on the cost of providing the age pension. CPA Australia has proposed that the government consider the use of compulsory income streams in retirement, and restrict the use of lump sums.

The report also notes that when the Superannuation Guarantee was introduced 20 years ago, it was thought that retirees could live on 40% of the husband's pre-retirement income. The consensus view now is that households need 60 to 65% of the pre-retirement income to live on.

With the Australian equity market still below the highs reached five years ago, many soon-to-be retirees may well struggle to fund their retirement. High management fees in some super funds have exacerbated the issue, and is one of the reasons why so much superannuation money is finding its way into self managed super funds. The fact that most retail super funds fail to beat the market, even before fees, is another concern.

If you are looking for ASX investing ideas, look no further than our brand new free report: The Motley Fool's Top Stock for 2012-13. In this free report, Motley Fool Investment Analyst Scott Phillips names his top pick for 2012-13…and beyond. Click here now to find out the name of this small but growing software company with huge potential. But hurry – the report is free for only a limited period of time.

More reading

Motley Fool writer/analyst Mike King doesn't own shares in any company mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »