How the superannuation changes could affect your retirement

No doubt you’ve heard about the changes to the superannuation passed by the Federal Government last week?

Well, if you’re not sure what they are – here’s a quick recap.

The new rules, which will come in effect on July 1 next year, impose a $1.6 million cap on your tax-free super pension.

It also includes a 15% earnings tax on transition to retirement pensions and the income threshold for the 30% contributions tax has been lowered from $300,000 to $250,000

The annual limit on after-tax contributions has also been lowered to $100,000, down from $180,000, while the annual cap on concessional contributions to $25,000 down from $35,000 for over-50s.

The new system will see the number of Australians paying the 30% contributions tax jump from 165,000 to 305,000.

Read more: Government passes superannuation changes to save nearly $3 billion

So, you might be wondering what all this means for you?

Well, an article in the Australian Financial Review points to the super changes as having a possible impact on your retirement.

The article argues that the changes could see Australians over the age of 50 work for an extra 18 months to enjoy the same living standard as the present day system.

Pointing to analysis by global consulting firm Mercer, the AFR writes that at the moment a 50-year-old earning $150,000 per year can retire at the age of 67 with a super/retirement income of “just below 70% of their net salary”.

But under the changes, they would only be able to put $25,000 a year into their super – giving them just 61% of their net salary in annual retirement income.

Senior actuary at Mercer David Knox told the AFR the changes would mean your super would be providing you with 10% less than the current system.

Mercer’s analysis shows that you’d need to work an extra 18 months if you didn’t want a lowered retirement income. 

The AFR also quotes financial advisers, who warn the changes will make superannuation system more complicated.

Claire Mackay from Quantum Financial told the publication the new rules “are substantially different.”

“Super is complicated. Now it is even more complicated,” she said.

What do you think? Do you think the super changes will have an impact on you?