The government's decision not to make major changes to the superannuation framework, as revealed in the Federal Budget delivered yesterday for the fiscal year starting on 1 July, further encourages Australians to continue to save for their retirement, says the Actuaries Institute.
Further reform to superannuation is likely after Federal Treasury completes its review of the key issues in developing a framework for the retirement phase of the superannuation system, by facilitating the introduction of 'MyRetirement products', said Institute President Jenny Lyon in a statement.
“Overall, the Federal Government has continued down the path of encouraging people to save for their own retirement, with few changes this year after major policy announcements in the 2016-17 Budget,” Ms Lyon said. “The Institute has argued for reform that makes the system more equitable and sustainable and opposes constant tinkering that undermines confidence in the retirement saving system.”
In his Budget Speech, Federal Treasurer Scott Morrison announced that single retirees over age 65 may make a A$300,000 (US$221,000) non-concessional contribution into super from the sale proceeds of a family home. Both married partners may make a A$300,000 contribution (and this is not restricted by the A$1.6 million pension transfer cap). This will encourage wealthier people to downsize and top up their superannuation.
Other Australians might be deterred due to the loss of the government-run Age Pension from means-testing of the capital released by downsizing, said the Institute, which added that its preference would be to restrict the non-concessional contributions to those with a total superannuation balance of less than A$1.6 million, as is the case for everyone else.
The Institute welcomes other Budget initiatives including further encouragement toward super fund mergers and a recommendation for a single scheme for dispute resolution for handling complaints.
Climate change and budget
The Actuaries Institute also says that it is disappointed the government did not announce any significant policy to mitigate against climate change risks, nor did it launch a robust policy framework to fund mitigation and adaptation measures against natural disasters. “The cost of natural peril to Australia stands at A$11 billion per annum, of which only 40% is insured,” Ms Lyon said. “The Institute is disappointed that the government has not gone ahead with the A$200 million per annum disaster resilience fund recommended by the Productivity Commission.”
The Institute is not alone in pressing the government to develop policy to address the implications for Australian businesses at risk from climate change. In a speech delivered in February, APRA Member Geoff Summerhayes warned that Australia’s finance sector faces significant risks from the impact of climate change and transition risk as the economy moves towards zero emissions.
The Institute encourages ongoing research and understanding of risks associated with climate change and informing the public debate.