A senior superannuation executive has revealed the subject of contributions is the aspect of the current retirement savings system financial advisers are finding the biggest challenge.
Speaking at The Tax Institute National Superannuation Conference held recently in Sydney, Colonial First State head of technical Craig Day told delegates: “My team takes [around] 12,000 to 15,000 inquiries a year from financial advisers [and] the number one topic is contributions.
“Now remember the changes to the contributions rules [were introduced] in July 2007, so how many years ago [was that?] A lot and it’s still the number one topic.
“The reason is the contribution rules have always seemed simple in concept, but the way they work [means] there is a lot of stuff going on underneath the surface.”
Specifically, Day noted management of the contributions caps is a topic that is raised repeatedly in the financial advice community.
“Every year without fail we have advisers calling us up saying: ‘Help, there’s something here, I’ve got an excess, the client has done this, what’s going to happen here, I’ve put a deduction notice in, the fund is telling me it’s invalid for some reason, why?” he shared.
According to Day, the contribution rules as they stand have created more compliance complexity than the reasonable benefit limits (RBL) that were abolished as part of the Simpler Super reforms in 2007 due to the breadth of their impact.
“My rationale for saying that is RBLs impacted maybe 5 per cent of your clients. And when did you have to deal with their RBLs? You dealt with them once when they got to retirement,” he said.
“Contributions caps impact potentially every single client, every single year, and you can have a client that is not a high net worth [individual who] ends up exceeding their cap.”
