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This weeks Federal Budget resulted in some Superannuation changes. GESB has provided the following information for members.
SUPER CHANGES ANNOUNCED IN FEDERAL BUDGET 2009/10
There were no fundamental changes to the superannuation system.
The popular Transition to Retirement strategy has not been abolished as prebudget
speculation suggested.
Superannuation remains a vital component in funding retirement incomes.
The main changes in the budget that impact retirement incomes are:
− Co-contributions;
− Salary sacrifice;
− Income stream draw-down relief;
− Age pension.
Temporary reduction in Co-contribution payments
Currently, the maximum Government Co-contribution payment is $1,500. From 1 July 2009,
it will be temporarily reduced to $1,000 but will increase again over time.
What does this mean?
For members receiving a maximum co-contribution, their government contribution will reduce
over the next 4 years. Even though the co-contribution will be reduced, the government will
continue to match contributions, meaning it is still a guaranteed 100% return.
It is important for your members to get contributions in before 30 June 2009 to take
advantage of the 150% Government co-contribution before it is temporarily reduced to 100%.
To find out more about co-contributions call Member Services on 13 GESB (4372), or go to
www.GESBdoubleit.com.au.
Salary sacrifice contribution caps to be reduced by 50%
The main change in relation to concessional contributions will be the effect on members’
ability to salary sacrifice superannuation contributions to a taxed fund, such as the GESB
Super scheme.
What does this mean?
For members over 50 yrs old:
The total value of your employer’s contributions and your salary sacrificed contributions that
are concessionally taxed has been reduced from $100k to $50k per annum. This transitional
cap will only be available up to 30 June 2012.
For members under 50 yrs old:
The total value of your employer’s contributions and your salary sacrificed contributions that
are concessionally taxed has been reduced from $50k to $25k per annum.
While this limits the amount that most people will be able to contribute, most GESB members
can still benefit from salary sacrifice strategies.
The good news is that for West State Super members these changes do not apply as it
is an untaxed fund.
Further good news for untaxed fund members is that there is no reduction in the
untaxed plan cap amount and the threshold of $1.1 million will still apply for the
2009/2010 financial year.
Reduction in minimum pension draw-down payments
The minimum draw-down relief for people in Retirement Income Products (Allocated Pension
and Transition to Retirement Pension members) has been extended for the 2009/10 financial
year.
People with retirement income can reduce the minimum draw-down amount; providing relief
for retirees who do not want to draw down more than necessary in the current economic
climate.
What does this mean?
Retirees can leave the majority of their retirement savings invested while the market
recovers. This is an excellent opportunity for people to revisit their financial strategy.
Increase to the age pension payment
An increase of $32.49 a week for the single person on the full rate of pension, which is an
extra $1,690 per annum. An increase of $10.14 per week for couples combined pension.
From 20 September 2009, single pensions rise from $304.19 pw to $336.68 pw, which is
close to an 11% increase. Couples pensions to rise from $497.36 per week to $507.50 per
week, which is a 2% increase.
The annual pension for singles will rise to $17,507.36 and $25,862.72 for couples.
A recent Westpac/ASFA “Retirement Standard” survey* states that to enjoy a ‘comfortable’
lifestyle in retirement, singles will require $37,829 per annum and couples will require
$50,651.
Increase in pension age
Increase in the Age Pension age from 65 to 67 will be implemented gradually from 2017 to
2023.
What does this mean?
Members are not going to be eligible for aged pension until they are older. Therefore, if
members are planning to rely on the age pension, they are less likely to have a ‘comfortable’
lifestyle in retirement.
The Age Pension alone may not provide sufficient income for a ‘comfortable’ retirement: this
underlines the importance of funding your own retirement through personal savings, e.g.
voluntary savings through your GESB super fund.
The government has also noted that they plan to align the preservation age with the
increased Age Pension age.
Changes to the pension income test
To improve targeting of the pension, the pension income test will be changed. From 20
September 2009, the taper rate (the rate at which the pension is reduced for each dollar of
additional private income) has increased from 0.40c to 0.50c for each dollar above the
income threshold (currently $138 a fortnight for singles and $240 a fortnight for couples).
(Secure & Sustainable Pensions, May 2009, www.budget.gov.au).
What does this mean?
A reduction in the taper rates may affect the amount you receive as an Age Pension. You
should contact Centrelink to find out what this means for you.
Centrelink contact details
Telephone: 13 2300
Website: www.centrelink.gov.au
Further information, including a webcast, can be located at GESB.com.au. We look
forward to assisting you and your members in making sense of the Federal Budget.
* Westpac/ ASFA, December 2008
Other sources: Secure and Sustainable Pensions, www.budget.gov.au
The information in this document is of a general nature. If you need advice that takes into
account your investment objectives, financial situation or needs, consult a suitably qualified
adviser. Products are issued by GESB; before making a decision in relation to your
superannuation consider the product information booklet at www.gesb.com.au. Financial
advice is provided by GESB Wealth Management Pty Ltd trading as GESB Financial Advice
AFSL No. 309268.
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