Is the government changing the rules of superannuation? 20



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We received a question/comment from one of our community members recently that asked if the government was trying to change the rules in regards to super. They had heard that the government wants to stop lump sum payments of super and instead use it to pay a pension, and then only when we have used this pension we can qualify for the government pension. This is apparently to stop retirees from having overseas trip and making large purchases. 

Let’s start at the beginning.

Remember your first year at work. I moved to Sydney from country NSW and my first job was in an office. On my first day I got an in tray and an ashtray! Everything was new and different. No more teachers, no more books, no more of anything I had become accustomed to over the last 13 years of institutionalised education. I went from year 12 back to kindergarten in one very small step. I remember making embarrassing mistakes and being very naïve. The great thing was that I had all the time in the world to get it right and get better at my job. I was ambitious and prepared to take on whatever challenges I faced. The point is, I had the advantage of time to make mistakes.

You don’t!

Fast forward to your retirement and it’s been many many years since you were that kid at his or her first job. The problem is the feeling of déjà vu. You look around and realise that everything you had become accustomed to over your working life has changed. The new rules that you have to navigate bear no resemblance to your working experiences and you are back to kindergarten again! The legislative rules are different and the rule of engagement are different.

So, back to our comment from one in our community. Take a deep breath and relax.

Former Commonwealth Bank CEO David Murray was commissioned to chair an inquiry into the Australian Financial System and provide some recommendations. This has been handed to the government in early December. Joe Hockey emphasised that this is not a government report and that the commission was independent in looking at some of the current and future challenges that we face.

The report recognised that people find it difficult to navigate the rules, that they don’t ask for, or have access to, enough high quality advice.

The report addressed, amongst other things, longevity risk in retirement savings. In other words, the problem of running out of money before you run out of time! The report went on to suggest that we could broaden the number of retirement income products available for retirees and also create a default to an annuity style income product upon retirement.

Essentially the report highlights that both our knowledge of how to manage retirement saving and our product choices currently negatively impact on our savings and result in some retirees running out of money.

The report recommends greater choice and that the “default” steers people towards products that provide sustainable income over time as opposed to lump sum products.  

The government will be accepting further submissions until March 2015 and will respond to the report mid 2015.

So, to answer the questions specifically;

  • No, the government isn’t currently trying to change the rules, they are simply in receipt of an independent report
  • The report does not recommend that you can’t take lump sums, it asks for broader choices for retirees

My final comment is that you should not wait for the results of an inquiry or new government mandated products to protect your retirement nest egg. A high quality financial adviser can assist in overcoming many of the challenges that the report has highlighted however this is a choice and one you have to make yourself. Look for an adviser that is “advice” focussed and not “product” focussed. If they start telling you what to buy before asking you what you need, leave the room!

Strategy is everything.

This editorial provides general information only. Before making any financial or investment decisions, we recommend you consult a financial adviser to take into account your particular investment objectives, financial situation and individual needs. Genesys Wealth Advisers and its Authorised Representatives do not accept any liability for any errors or omissions of information supplied in this editorial.

If this above government proposal was passed, would you be in strife? Do you have enough to fund your own retirement? Tell us your concerns below.

Peter Audet

Peter Audet has made a career in financial services starting in 1988 in Sydney and establishing his advice business in 1995. Varria provides advice to clients right across Australia. At Varria, we believe that when you really understand how money works for you, you unlock the key to being happy and satisfied with it. They call it Wealth Truth.

  1. In the 70.s we tried for super and were told we were not entitled to it. Personality clash. LOL.

  2. The Murray review is the white papers the Abbott Government has commissioned..The government’s response to Murray’s recommendations for tighter and tougher regulation of superannuation, financial planning and financial products will be interesting. It has incurred political damage this year over its largely unsuccessful attempt to roll back elements of the Labor government’s future of financial advice reforms. .

    1 REPLY
    • Leanna, we know where this is heading. In order for the government to reduce spending on payment of pensions, and make those who will have a reasonable super be self funding in retirement. This is good in theory.The problem I have with it is entrusting the money to ‘financial advisors’ As was the case with around 400 people who were advised from these people under the umbrella of the Commonwealth Bank sadly they didn’t fare to well at all.

  3. My super may last me 2 years if I’m very frugal with it then I’m at the mercy of the government. Not looking forward to that time. I’m due for retirement January 2018. If I’m well enough I will continue working as long as I can unless I win lotto lol.

    2 REPLY
  4. I don’t blame people for blowing the money on one last trip, their first and only new car/caravan and paying off debts. It feels like governments nowadays are financial predators and we are the prey!!!!!

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    • Yes it is the same with the redundancy package if you use it to pay of yoy mortgage(the first instinct of a redubdant umemployed.) You are deprived of jov search for the lenght of time that centrelink deems it would take you to spend it if you use it as income. Of course if you are an older redundant there is no guarentee that you will get a job anytime in the forseeable future but at least you would own you house if you wereallowed to follow your first instinct. Methinks the givernment is hand in glove with the lenders to deprive you of home ownership after paying the mortgage for years .

  5. High quality advice from a former CEO of the Comm bank? What about the 400 or so people who lost funds due to so called ‘financial advisors’ from this institution? Be very careful who you allow access to your super.xx

  6. Superannuation is not good anymore there are too many rules and regulations you are better off just having your savings so the greedy and corrupt govt can’t get their greedy hands on it.

  7. So true Linda I don’t have any either they sure are predators well the won’t get anything from me cause I got nothing left.

  8. I took a Lump Sum out for deposit on a older style house and my Pension was cut because CL calculated how many years I could have lived from the Lump Sum after asking about if I take 2000 Dollars more out the answer was we calculate how long you can live from this amount and we cut your Pension again for the time Calculated so I did not go in Holiday only used it to have a roof over my Head and did not have to claim rent assist so Supper is not your money anymore to due with what you like we saved during our working live everything we could to have a better live but most was lost in the crash in 2008 / 2009 as a pensioner you will never regain that loss all that money gone and it was not our fault only because we are told what to due and have no choice you have to put your money in something so the Government knows how much you have all the time and were it is

  9. I do think that something will have to be done to ensure that super is used for retirement as it is meant to be. A lot of retirees are blowing almost all, if not all, their super in a dream holiday or major purchase, then have little left to live on so depend on the age pension and the whole point of super was to enable people to live better longer without having to depend on the age pension.

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