Self-managed super funds hit

The West Australian, 29.7.16:

The 100,000 West Australians who manage their own superannuation have been rocked by research showing half will be hit by the Turnbull Government’s tinkering with nest eggs.

Investigations by the Self-Managed Superannuation Fund Association and research house Accurium also revealed:

  • One in five people with DIY super would be caught out by the plan, to limit what they can transfer to a superannuation pension stream to $1.6 million.
  • 70 per cent of SMSF members who contribute more than $25,000 a year to their fund will not benefit from a plan to allow savers to carry forward unused contribution limits for up to five years.
  • Almost a third of couples with an SMSF will not have enough for a “comfortable” retirement income of $58,922 a year.
  • A 65-year-old SMSF couple would need a nest egg of $1,454,000 to fund a $70,000-ayear lifestyle in retirement, with a 95 per cent chance of not outliving their money.

“Our analysis also shows that SMSF trustees are likely to bear the brunt of the Government’s proposed changes to superannuation,” the report noted.

“While the Government has estimated that only 4 per cent of the population will be impacted by the changes, a very significant proportion of these will be SMSF trustees. Indeed, were the policies in place in 2015, over 48 per cent of the SMSF trustees in Accurium’s database would have been impacted by at least one of the changes.”

The changes outlined in the last Federal Budget have been partly blamed for the coalition’s poor result in the election.

Treasurer Scott Morrison and Prime Minister Malcolm Turnbull are under pressure from their own backbench to water down some of the proposals. A key measure – capping the amount that can be transferred to a tax-free pension fund to $1.6 million -would force those with bigger nest eggs to roll back a proportion of their pension accounts to so-called accumulation accounts, where the earnings would be taxed. Yesterday’s report suggested SMSF trustees would be only $OW a year worse off because of the extra tax.

The other contentious change was capping non-concessional contributions, principally those not made by employers or through salary sacrifice, at $500,000, starting from 2007.

It is seen by some as being a retrospective law which penalises people for past decisions.