I recently went on a holiday to Tasmania. It was a great experience—the air was clear and clean, and the scenery was stunning. And while I was there I walked the Overland Track.
The constantly changing scenery (which was spectacular) and the variety of interesting people I got to meet made it an exhilarating experience. But I also found it quite confronting having to walk an entire day in the rain carrying an 18-kilogram backpack while facing the difficulties of mud, rocks, tree roots and boardwalks.
Still, it was nice to get into the outdoors (a far cry from my air-conditioned office) and meet the challenge of a six-day bushwalk. For me, the change really was as good as a holiday. But for a lot of people, change is never as good as a holiday. Instead it makes them feel uneasy, and puts them way out of their comfort zone.
Especially when it comes to their finances.
“The government is always changing superannuation,” I hear people say. “It’s one of my biggest concerns.”
Yes, the government has made changes to superannuation. And to a lot of people they seem to happen far too often. But the government is aware of the need to not make changes because it would be detrimental to superannuation fund members.
The new retirement plan
The government’s recent “Better tax, lower, simpler, fairer” white paper recognises the need to encourage people to save for their own retirement. And it’s created a lot of discussion in the media. Hardly a day goes by when some commentator isn’t talking about tax and how the government needs to address its future direction to cope with Australia’s changing age profiles.
The key concern is the decline in traditional working age Australians compared to those over 65. At the moment, for every person over the age of 65 there are 4.5 people aged 15 to 64. But that figure is expected to drop to 2.7 by the year 2055.
This will have significant implications for age pension payments and retirement incomes, as well as how they’re funded.
You can clearly see that all Australians will need to change their retirement income strategies in the future. Unfortunately, the government sees itself as the key driver in this area.
Providing funds for people to live off when they retire is key to all retirement saving strategies. And the government is well aware that everyone’s getting older. So it’s encouraging everyone to put more into their superannuation, and will need to keep doing so for many years to come.
Which means the last thing it can afford to do is make superannuation look unattractive.
While the government remains focused on expanding its tax collection measures to cover long-term issues, the driving force will be to strongly encourage Australians to save for their own retirement. And self-funded retirees are a cornerstone in delivering effective retirement incomes.
Change may well not be as good as a holiday. But we need to have faith in the government that the changes will have a positive impact, and continue to support self-funded retirees.
If you’re a self-funded retiree you can be confident about the government’s changes. But in any case, from a tax perspective superannuation contributions will always be attractive.