Mercer Human Resources Consulting has reopened the debate about allowing fund members to leverage superannuation for mortgages and other purchases.
In a submission to the Parliamentary Inquiry into ‘Improving the Superannuation of People under 40’, Mercer has suggested modifying the preservation requirements for contributions so that 50 per cent of personal (after tax) contributions made by the under 35s can be withdrawn at any time for any purpose along with the abolition of the separate limit on deductible contributions for people under 35 so that the same contribution limit apply to all people under 50.
As well, Mercer has suggested reducing the rate of superannuation fund taxation from 15 per cent to 10 per cent.
Leading actuary and principal with Mercer, David Knox, said the suggested changes would improve the attractiveness of superannuation for the under 35s by enabling access to half their contributions and encouraging contributions by improving the tax advantages of super compared to other investments.
“We’ve taken a close look at the major barriers and disincentives to making additional voluntary contributions by generation Y, and found the advantages of doing so aren’t very clear,” he said. “The major disincentive for this group is being unable to access their superannuation for decades. In addition, there is a preference to repay debts; an attraction to other long-term, more accessible investments such as property and shares; lack of clear incentives in the tax system and the risk of future changes to the super system.”
Knox said that recent ‘sweeteners’ such as the extension of co-contributions, and the abolition of the superannuation surcharge combined with concessional tax treatment of super funds, did not go far enough to encourage most under 40s to put more into their super.
