They say a week is a long time in football, but in the world of superannuation at the moment a month seems like a lifetime.
You see, a month is how often I have between writing editorials and since the bombshell of proposed superannuation changes was dropped on all of us back on 3 May, circumstances and speculation as to what might happen and what it all means have been a movable feast.
And September was certainly no different as amendments to the original proposed changes, some people probably saw as inevitable, were announced.
Naturally enough the amendment attracting the most interest and headlines was to the proposed introduction of a $500,000 lifetime non-concessional contribution cap to be assessed from 1 July 2007.
The new parameters now dictate that instead of the introduction of this most unpopular lifetime cap, non-concessional contributions will be limited to $100,000 a year from 1 July 2017 with the ability for individuals to bring forward this cap three years, allowing them to contribute up to $300,000 of after-tax money into their funds at any time during this period.
So at the end of the day we’re pretty much back to the way the current system operates, only the yearly non-concessional cap has been reduced from $180,000 to $100,000 and the three-year bring-forward provision is similarly down from $540,000 to $300,000.
There is, however, one main difference and that is individuals can make these types of contributions within these limits as long as their super asset balance is below $1.6 million.
This caveat means the government has still managed to maintain its goal of prohibiting people from accumulating what it would consider ridiculously large retirement savings assets suggesting super funds are being used primarily as an intergenerational wealth transfer tool.
Reaction to this amendment has been mixed with some commentators remaining critical of the government for perpetrating what appears to be a dramatic backflip on a policy position it was so steadfast on since budget night.
To me this sentiment is a little unfair as I think the announcement in September has resulted in a better outcome for all superannuants, which is what we should all desire. However, that doesn’t mean the government should not continue to draw criticism over the chain of events that got us here.
It would appear to me we are now where we should have been when the original announcement on budget night was made.
Having had dealings with most of the groups considered the main stakeholders in the industry, I’d have to say most of them are reasonable and prepared to accept changes to the system as long as they are sensible and practical from an implementation perspective. It’s safe to say most of these stakeholders have been highly critical of many of the changes to the super system on budget night, especially when it came to the lifetime non-concessional contributions cap.
My subsequent discussions with these groups have confirmed the changes were a shock to them and there was virtually no consultation process involved. Surely a better way to go would have been to have a proper consultation process before the budget measures were finalised so we could potentially have reached this point in May with the ability to then properly consider the implications and how the implementation of the changes would be achieved.
Instead the government created a fairly tumultuous environment for individuals and practitioners over a four-month period that only helped erode confidence in the retirement savings system.
So my question to the government is: If we were always going to reach what could be considered an acceptable compromise position, was all the angst caused in between really worth it?
