Trustee lobby group SMSF Owners’ Alliance (SMSFOA) has hit out at the Grattan Institute’s recommendation that yearly concessional superannuation contributions caps be set at $11,000.
“This narrow approach defeats the purpose of superannuation,” SMSFOA said.
“If people can only save enough for retirement to be a bit better off than the pension, then, rationally, they will spend their retirement savings as fast as they can and go on the pension.
“Where is the incentive to save more and be financially independent?”
The suggestion came as part of a paper, “Super tax targeting”, the Grattan Institute released last week, which in justification of limiting concessional super contributions to $11,000 said: “Eighty per cent of contributions above this level come from people likely to retire with enough assets to be ineligible for an age pension even without such big super tax breaks.”
The think tank’s argument was framed around reducing the tax concessions currently associated with retirement savings.
But the argument held no weight, according to SMSFOA.
“This is not the way to grow Australia’s retirement savings and give everyone the chance to live comfortably at a level related to their pre-retirement income, a concept known to economists as the ‘reasonable replacement rate’,” it said.
“This is generally accepted to be around two-thirds of pre-retirement income.
“Grattan’s plan would throttle retirement savings and condemn millions of Australians to spend the last years of their lives in genteel poverty.”
SMSFOA concluded the institute was in favour of all Australians having to rely on the taxpayer-funded age pension and did not like the idea of superannuation.
“Superannuation is not a welfare system. It is a retirement savings system that delivers important social and economic benefits to the nation,” the lobby group said.
“Grattan doesn’t see this distinction and seems to regard superannuation as a social engineering tool like the welfare system.”
SMSFOA predicted if the institute’s recommendation was adopted, it would mean less money would go into the superannuation system, which would in turn result in lower levels of investment and fewer jobs.
“The corporations that back Grattan should think about this,” it said.