More people are worrying about changes to superannuation

EMAILS keep pouring in about potential changes to superannuation -  I am not overly concerned.  There have been non-stop changes to the superannuation system since it became universal more than 25 years ago, but there has been no element of retrospectivity. 

So what can we expect?  The government has promised no changes in their present term but this has only a few months to run at most.  Opposition Leader Shorten has already announced Labor's intention to increase the contribution tax to 30% for people whose adjusted taxable incomes are in excess of $250,000 a year.  This is not a huge leap from the present system where the 30% tax applies to people with incomes of over $300,000.

Under the Gillard government there was a proposal to tax the income of a pension fund once fund income exceeded $100,000 a year per member.  This was a fairly mild proposal because the 15% tax was only on the excess income over $100,000.  But the predictable outcry ensued, and the proposal did not become law.

It is now Labor policy to reintroduce this tax but they have made it tougher - it will apply once income exceeds $75,000 a year.  Given the failure of the last attempt, the chances of this getting through must be considered slim, but even if it did, it's probable only a few would be affected.

Yes, more change is inevitable. But in my view the biggest risk for most retirees is an over-emphasis on cash in their portfolio because they are averse to risk. Many retirees can now expect to live 25 years or more after they retire.  For them, holding money in cash may be one of the riskiest strategies of all.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au


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