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Superannuation changes may be up for debate

The Financial Services Council of Australia issued its annual report on the superannuation industry this week, with some interesting findings. Approximately half of all Australians don’t know the cost of fees on their fund, although nearly three-quarters of those surveyed were aware of the approximate balance of their accounts.

Superannuation’s role as a political football looks set to continue, as the Labor government’s commitment to incrementally rise compulsory employer contributions from 9% to 12% by July 2019 comes under potential revision from the incoming Liberal government. The Superannuation Guarantee rise formed part of the Mineral Resources Rent Tax legislation, passed by the Senate in 2012. At the time, the Coalition voted against the legislation, suggesting it may be up for review.

The survey found more than four-fifths of Australians support the contribution rise, although Prime Minister-elect Tony Abbott, is said to be against increases in employer contributions. Under the current legislation, Australians on fixed remuneration packages inclusive of super would see a reduction in take home pay, as their gross pay is adjusted to reflect a proportionate rise in super contributions from 9% to 9.25%. Those paid a base salary plus super would see their take home pay stay the same and their super contributions increase.

If fully implemented, the rise from 9% to 12% would be an effective 33% increase, and a strong tailwind for specialist fund management and advisory businesses like AMP (ASX: AMP), Perpetual (ASX: PPT) and BT Investment Management (ASX: BTT). Although nearly two-thirds of Australians said they were unlikely to change funds in the future, the sheer size of the market, estimated at more than $1.6 trillion, means it remains critically important.

Foolish takeaway

Although the GFC eroded trust in the system, more than half of Australians thought the system was something to be proud and important in confronting the issue of an aging population.

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Motley Fool contributor Tom Richardson owns shares in AMP.

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