Younger superannuants may not consider concessional contributions as important as other financial matters due to low interest rates with the risks of ongoing changes to the superannuation system, according to a technical expert.
Speaking at the Association of Financial Advisers 2020 Roadshow in Sydney today, Challenger head of technical services Andrew Lowe said he had been questioned about the validity of contributing money into superannuation compared with other saving structures or reducing mortgage debt.
“For a client who has an outstanding mortgage on their principal place of residence, that is, non-deductible debt, is it worth eliminating that debt or contributing to super or saving outside the system?” Lowe said.
“It is an interesting conversation, particularly in light of interest rates and in respect of mortgage and the break-even for earnings on investments compared with superannuation and concessional contributions.
“If we are talking to clients in their 20s to 30s, I get that superannuation contributions do not matter, and I get a sense the legislative risks attached to preservation could be a difficult thing to overcome.”
Despite this, he said the rules for catch-up contributions into superannuation were more favourable than in the past for people looking at making smaller contributions.
“The rules are getting more flexible today around getting money into superannuation than they have been in prior years, but I am still coming across a lot of advisers challenged by relatively modest caps in terms of concessional contributions and non-concessional contributions,” he said.
“While it may be easy to get some money into superannuation, it is more difficult to get a lot of money into superannuation than it has been previously.”