Contribution caps limiting the savings Australians can make for their retirements need to enable people to save for a comfortable lifestyle, experts believe.
With a Deloitte Actuaries and Consultants report showing the majority of Australians are set to fall short of securing adequate superannuation savings to provide for a “modest lifestyle” in retirement Deloitte superannuation leader, Russell Mason warned that contribution caps had discourage retirement savings.
Mason said that while there needed to be some limit on contributions that attract a tax deduction, “the limits need to make sense”.
“There have been many different regimes for limiting tax-deductible superannuation contributions in the past which have created uncertainty, inequity and discouraged retirement savings,” he said. “Australians have tried to navigate multiple Reasonable Benefit Limits, specific contribution limits with some dependence on age, surcharges, and – most recently – on/off again index¨ation of the limits.
“The limits are now assessed year by year, with no scope for claw back to compensate for periods out of the workforce – continuing to create the gender divide – or for different lifecycle stages.
“There is limited and inadequate scope to top up super in the years approaching retirement to finance a comfortable lifestyle.”
Deloitte’s Adequacy and the Australian Superannuation System – a Point of View, report showed that workers needed to contribute “an extra 5.5 per cent to 7.5 per cent of salary to superannuation each year” on top of the 12 per cent superannuation guarantee to self-finance a comfortable retirement and not have to rely on the age pension.
Deloitte special superannuation adviser, Wayne Walker, said change was needed to secure the future of the superannuation system.
“The bottom line is that if we leave the system in its current form, members will need to contribute more – much more – to achieve even a modest level of financial security in retirement,” he said.
