Superannuation: retrospectivity to cut retirement income

Finally, someone at the big end of town sees sense.

Superannuation: retrospectivity to cut retirement income

The big end of town doesn't often support the need for greater scrutiny of legislation surrounding their practices, however, Ian Silk is bucking this trend.

While Malcolm Turnbull may believe that a royal commission into the financial services sector is unnecessary, AustralianSuper’s Chief Executive says that his fund, worth $100 billion, is supportive of such a move. As the first institutional shareholder of the big four banks to do so, it’s a gutsy move, but one he’s not worried about. "I reckon you've got to have a pretty sunny view of life to think that the banks are going to change their behaviour and conduct of their own volition, so if there's going to be an external catalyst for that, such as a royal commission, I'm pretty relaxed about that," Mr Silk said.  

The lack of confidence in the financial services sector can be largely attributed to poor banking behaviour caused by “conflicted remuneration”. "Conflicted remunerations are designed with particular outcomes in mind and the financial planners and insurance assessors who have not acted in the interest of their customers have been acting consistently with the overt or covert directions of their employers."

Speaking to the Financial Review on Monday, Mr Silk also believes that the Government will have to discard some of its highly prized superannuation changes that were announced in Budget 2016/17, as it will be difficult to get them past the Senate. "It will be a test for their negotiating ability because it is going to be a challenge," he said.

The reforms he thinks will pass both houses, largely due to Labor Party support, would be limiting the tax-free earnings for retirees with more than $1.6 million in retirement income funds and the low income superannuation tax offset.

However, it would be more difficult to secure support for the reforms that would hit the middle of the market – caps on concessional and non-concessional contributions.  

Despite much discussion about whether or not capping non-concessional contributions at $500,000, backdated to 2007 was retrospective or not, Mr Silk is in no doubt of the effect it has already had. "The new $500,000 cap was retrospective to a degree and it seems pretty clear the Government will now be under some internal party room pressure to modify that."

The measure has prompted a jump in inquiries not just from AustralianSuper’s members who have had their immediate retirement plans thrown into disarray, but also from those without sufficient balances that would result in them being affected.

"Because there is that element of retrospectivity it just feeds into the fears some people have about putting money into super," he said.

The changes will also disadvantage those who had planned to catch up on their retirement savings in later years, meaning a retirement income shortfall and a greater reliance on the Age Pension.

"It will hurt some people who are trying to catch up their super contributions in those later years, particularly women, so if the change to concessional contributions was to be reviewed and the status quo retained that is certainly something I would be comfortable with," Mr Silk said.

Noting that the Labor and Liberal Party objectives on superannuation are similar, it was, he said, more important to focus on the disadvantaged low income workers who get no tax concessions on their super. And this is why the low income superannuation tax offset should be supported.


Do you agree with Mr Silk’s comments? Should a Royal Commission into the financial services sector be top priority for the Government? Should it go further and cover all areas of retirement income? Do you think the limiting of non-concessional contributions to $500,000, backdated to 2007, is indeed retrospective?



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    13th Jul 2016
    Of course it is retrospective. Of course low income workers should be able to get contribution concessions &/or copayment S.
    14th Jul 2016
    Why not used the tax people pay to put money into super to top up the super balances of low income earners?
    14th Jul 2016
    Or better still adjust the incomes of low income earners to reflect the productivity gains over the past 20 years and raise them finally in real terms.

    It would mean really wealthy CEOs and financial industry giving up a bit but the stagnating and falling real incomes has been a bit overdone.

    If wages kept up with inflation then people could put their own money into savings.
    13th Jul 2016
    Should a Royal Commission into the financial services sector be top priority for the Government?
    -Definitely and bring criminal charges against the guilty bastards who ruined so many retirees.
    14th Jul 2016
    A lot of responsibility lies with the retirees themselves because they invested their money for big returns forgetting big returns come with big risks. Financial services only provided what the retirees wanted so how is that criminal?
    Tom Tank
    13th Jul 2016
    Malcolm Turnbull does have a problem on his hands with this one as the Big Banks are major donors to his party and "he who pays the piper calls the tune".
    There has to be a Royal Commission into financial services, either now or later. It will be difficult for MT as the right wing of his party, who are already calling for his head, will not be pleased at such a move.
    I await the decision with bated breath but will certainly not hold it as I doubt it will happen soon.
    13th Jul 2016
    Royal Commission needed urgently.

    Too much corruption.
    13th Jul 2016
    Exactly! Bring on the Royal Commission into Bank's practices , unconscionable conduct. Open up the whole can of worms...and include the political grubs that eat of them.
    13th Jul 2016
    1.1 Looking back on or dealing with past events or situations:
    ‘our survey was retrospective’
    1.2 (Of a statute or legal decision) taking effect from a date in the past:
    ‘retrospective pay awards’ - Oxford Dictionary

    From 7:30 pm (AEST) on 3 May 2016, the Government will introduce a $500,000 lifetime cap on non-concessional contributions taking into account all non-concessional contributions made since 1 July 2007. This is the date from which the Australian Taxation Office has reliable contribution records. The cap will apply to individuals aged up to 75, and will be indexed in $50,000 increments in line with wages.

    So if the Government is seeking to enact new legislation in 2016, looking back to when accurate records began and applying the new laws from a date in the past, how is that NOT retrospective?

    However, there does seem to be some confusion about what this proposed cap includes. It does NOT include the employer contribution OR any salary sacrificing amounts. If you have not made any non-concessional (i.e. after tax) contributions to date and then you win lotto for example, you can put $500,000 into super. If you had put the inheritance from Great Aunt Flo of say $50,000 into super in say 2011, you could only add $450,000 of that lotto win.

    So if you were still working (on a low to modest salary) the way round this could be to live off the lotto win and sacrifice your entire salary into super?
    13th Jul 2016
    There is still the Annual Cap in place, so you can't just put $500K into super. The cap is $180K per year if you are under 65. There is also the bring forward rule which allows you put in 2 years worth without penalty.
    I can't understand why the Govt is trying to impose this limit, Just TAX THE EARNINGS of anything over $80K per year at a nominal rate.
    13th Jul 2016
    Royal Commission into Banking and financial services? LONG overdue!!
    14th Jul 2016
    Why? Will it stop people investing their money for big returns without worrying about the risks? No it won't.

    Do you buy a lottery ticket and try to blame someone for not selling you the winning ticket? No because you understand that in all likey you haven't been sold the winning ticket.

    So you invest your money for a big juicy return and all you see is big dollars and ignore the risks. Now you find that that big juicy return explded and took most of your capital with it. So you now want someone to blame for your stupidity? So ehy not have a royal commission to try and find out that people's greed was real reason for the financial losses. Looks like I just saved the ckuntry millions.
    14th Jul 2016
    Up front and trailing commissions need to be clearly documented.

    Also fees and charges listed as well as insurance cover and the ability to opt out of insurance if necessary.

    Unfortunately people are not taught to read the documents and some charges are hidden.
    13th Jul 2016
    By all means lets have Royal Commission into the financial sector, however there is a need to ensure the findings and recommendations would be acted on. Unfortunately, history tells us that this is often not the case making the whole exercise futile and a huge expense. So prior to commencing government needs to provide a pledge to implement these outcomes. I very much doubt that any politician will provide such an undertaking.
    13th Jul 2016
    They would if there was a judicial High Court order.
    Old Geezer
    13th Jul 2016
    Royal commission normally don't have any teeth to do anything so I really can't see what a Royal Commission will achieve.
    14th Jul 2016
    Royal Commissions have precisely the number of teeth they are given. If the government does decide to hold a RC [which I doubt], the terms of reference will be a good indicator of its intentions and integrity.
    14th Jul 2016
    A royal commission will not stop people's greed.
    14th Jul 2016
    Every journey of a thousand smiles begins with a single Royal Commission...
    ex PS
    20th Jul 2016
    Nothing will stop peoples greed, but strong supervision and large penalties will definatley curb it. For a start make C.E.O,s responsable for the actions of staff who rip clients off, why are they being paid so much if they can't control their own policies. Off course staff who act fraudulantly should be jailed just like any other thief.
    Old Geezer
    13th Jul 2016
    I don't agree with the changes to either caps especially the lifetime cap of $500,000 for non-concessional one. If your super fund can have $1.6 million transferred into it people should be able to put $1.6 million into it.

    13th Jul 2016
    This retrospectivity is ANOTHER one of Talkbull's stunts for himself and his high-earner mates - in both government and private industry.
    Of course there should be a Royal Commission into financial services, but the government would want this just about as much as they would Dracula doing a stock count at the blood bank, as their rotes would be exposed and a fairer system could be found for those of us who have been ripped off for a long, long time - by both the government and the crooked financial advisors and planners.
    14th Jul 2016
    TALKBULL! Love it.
    14th Jul 2016
    People should take some resposibility for theiir own decisions. If we didn't have a GFC I very much doubt we would be having this conversation. The bigger the returns the bigger the risk. If an investment is too good to be true it usually is. If you don't fully understand how something works leave it alone. Ignore all that at your own peril.

    Banks sell products and services. You would buy a car without taking it for a test drive and learning how it works. So I can't understand why people invest their money without doing the same. No they just hand it all over and hope for the best. Sorry folks but this is where you have broken all the golden rules of investing money. You have handed your money to a stranger hoping to get it back with a big juicy return.

    A royal commission into the banks will not stop people handing their money over to strangers on trust that they might do the right thing with their money. Abuse me all you like but at the end of the day this is the reality of what really happened.

    I had people tell me what great investments they had before the GFC who thought I was a fool when I said I wouldn't invest in them. I tried to explain that they didn't stack up against the golden rules of investment but greed already had them hooked. These are the people now looking to blame the financial institutions for thier own greed. A royal commission will not stop people's greed. So why have one?
    14th Jul 2016
    You are quite right Bonny.

    However most people would be better off investing in a home and a rental for income in retirement as far as I can see as they are not educated and interested enough to invest in markets.
    The investment property would then provide cash for nursing home entry seeing it is the one service you have to oay hundreds of thousands to access.

    Even now I have friends relying solely on bank dividends totally unaware of the banking fiasco playing out in Italy and Germany.

    It would have been best if retirement savings had remained the old defined benefit type( maybe not based on final salary but on needs) all in something like the Future Fund under the Reserve Bank umbrella. Not for Profit. With a very powerful administrator overseeing things.

    There are just too many crooks and as you say too many people believing that they too can be rich in the short term.

    13th Jul 2016
    Where were Mr. Silk and others when the LNP & Greens changed the Assets test last year (wef Jan 2017), which severely discourages savings for self-funding retirement by those in the middle (part-pensioners), and will encourage running down Super by those affected? These Assets Test changes should be immediately reversed, and the whole Retirement Income issue fully investigated by genuine financial experts - not by stupid self-centred politicians and bureaucrats in Canberra.
    13th Jul 2016
    What you have said is very true. Saving has become a disincentive, and people will run their superannuation down. The government is VERY shortsighted with this legislation and it will backfire on them if not altered.
    14th Jul 2016
    Not short-sighted at all, Eddie - just dedicated to reducing the majority under penury. That way the best off can rule the roost without interruption from the peasants, who will be too hungry to refuse any crust thrown their way.

    How rapidly we go back 200 years of social evolution, one you remove any real rights from The People, starting with their right to not have affirmative action, and all that followed from it.

    EVERY 'social adjustment' over the past forty years has degraded the Rights earned and fought for, including by our fathers and grandfathers in wars.

    It is no secret that following WW's I and II the 'common man' expected, and rightly so, a better share in prosperity and not to be treated as a serf.

    We've been going backwards ever since the advent of the myth of massive social and economic inequalities was brought forth upon the land.
    14th Jul 2016
    Interestingly TREBOR that American workers now earn less in real terms than they did in 1996.

    It is amazing that all the wealth generated for 20 years has gone to the owners of capital without a murmur.

    Surprising what a bit of access to debt can do. People actually believe they are getting richer because they can borrow more.
    13th Jul 2016
    I'm not even at these proposed changes. What about the Jan 2017 re assessment of assets? I retired... then my wife joins me resigning a year ago (but not at age pension for 2 years) and guess what? my income will be cut in 6 months and I can't even make it up by her applying for 2 years. Oh, I must have a lot? I lost $20000 last August in super.But isn't it also retrospective if you change the rules for existing retirees? I should at least mark time at my part pension until the rules overtake me.
    14th Jul 2016
    13th Jul 2016
    I think the $500K cap is more about getting the Baby Boomers to spend some of their cash, to help stimulate the economy, than anything else.
    13th Jul 2016
    I don't think so, the share market is the preferred venue. The cap is insane, far better to tax the earnings over $80K pa.
    Old Geezer
    13th Jul 2016
    I don't agree with the $500,000 cap either. Due to volatility taxing earnings over a certain amount is also not a good idea so it's better to have the amount transferred into a pension capped at $1.6 million.
    13th Jul 2016
    Can't be Kactus.

    If you wanted to helicopter money into the economy you wouldn't cut 2.3 billion from part pensioners. In fact you'd increase pensions and make sure the money went to those with the highest velocity of money rating.

    Outside of super you can earn $58000 as a couple without tax so I don't think the $500 000 is relevant. If you paid tax it doesn't matter if you invest outside super. In fact it is a good idea and sets up another investment basket. One controlled by you and outside government rules about superannuation. And it is liquid before retirement age.
    Old Geezer
    13th Jul 2016
    I agree have as much as you can outside super as it is not tied up in rules and regulations like super. We have maxed out our tax free threshold as well as taking a pension from our super fund.
    13th Jul 2016
    Well said George keep it up could not agree more.

    14th Jul 2016
    Federal ICAC NOW!
    14th Jul 2016
    Outcome of it is already known. People's own greed caused all their financial problems.
    14th Jul 2016
    Maybe they should "crowdfunding it" as you suggested in the other article - ?
    ex PS
    20th Jul 2016
    No wonder people are confused, people who were condeming investors for not chasing better investment percentages last week in order to match the deeming requirements, are now calling those that did, greedy investors who did not play it safe enough.
    Am I the only one who is confused or is it jet lag?
    14th Jul 2016
    As an earlier comment stated - the outcome of a royal commission is predetermined by the terms of reference. And whilst the 'theatre' is acted out, innumerable briefs, SILKS, gowns and clowns get in on the act and contribute collectively to the extortionate cost of staging the pantomine, needless to say they land a windfall in the process. What will it achieve - NOTHING, unless the government so chooses to apply that which suits their purpose(s) or that of their faceless men and/or financiers. (Who) "Pays the piper" is apt, perhaps.
    Bonnys' conjecture suggests - "Greed", may well give cause for the overwhelming call of an effect in the form of an R.C; however, that remains a matter for individual interpretation and motivation. Holy smoke - "Nor cast your pearls before swine. They sow the wind and reap the whirlwind".
    14th Jul 2016
    What good will a Royal Commission achieve? Gather a collection of highly-paid "experts" and legal eagles together for a year or two at tax-payers' expense, have the media waffle on at the end of this process about how this or that "should" be done, and the "guilty" parties laugh all the way to the bank with their ill-gotten profits (instead of into gaol cells), then everything dies down and it's all forgotten. Better to give the money to provide housing and services for the homeless. But in all probability, neither of these options will happen under the LNPs. Cynical? You betcha!
    14th Jul 2016
    Full aged pension and rent assistance is plenty of money, and a person can save $600 of it each month too.....$1000 a fortnight is plenty
    14th Jul 2016
    Conflicted renumeration in the financial sector is creating a great deal of angst world wide.

    Adam Smith warned of the danger of allowing the spending of other people's money and this is what has occurred within Superannuation and financial services.

    When CEOs of large funds and their senior employees receive millions of dollars in bonuses each year that is money denied fund members or shareholders.

    Perhaps as we regulate minimum wages we should have a limit on maximum wages and tax over a certain limit, even a high limit of say $100 million at 90%.

    Changing the rules through the game is never a great idea and always causes huge trouble.
    The current government needs a much wiser group of advisors as they are msking too many silly mistakes as far as I can see.
    Not Senile Yet!
    16th Jul 2016
    No Royal Commission!
    Waste of Time & Money.....why???
    It is just another way for the High End of town to feed on the Taxpayer.....and there is NO Intention to change anything!
    In fact...the Senate has already denied Legislation to further reduce Investors Current Protection!
    Whilst Blaming others for Poor or Unwise decision can be Bad form......Bonny......People still need to be protected from being taken advantage of......I'll advised.....deliberately!
    As for the Banks.....they are Regulated by law by the Government.....but no one wants to DO Anything!
    But it is but a few select areas within the Banksame themselves......that are Corrupted by the lack of Regulatory oversight.....and any Govt has the Power to implement tighter Scrutiny!
    You do not need a Billion dollar Royal Enquiry to discover that.....nor to prosecute individuals!
    Retrospective Legislation of any sort.....will be Any Governments Suicide......Voter's will react they shown already!
    Labor must be Glad that the Libs won....all they have to do is sit back.....and watch the Libs tear each other
    17th Jul 2016
    Speaking about cuts to super and aged pensions WHY is the governments not looking at all the religious organisations that do not pay any tax at all ?? !!! Having them pay tax like the rest of us would make the system much fairer and take the burden off hard working Australians.
    ex PS
    20th Jul 2016
    M.T has won his position by the skin of his teeth. He needs to put his back room boys where they belong, in the background. He has won government in his own right, he was not given the job by his previous backers.
    Time for him to show some backbone and ditch the extreme right wing policies that were forced upon him by the LNP power brokers. They may be concerned that a Royal Commision into the banking industry will lose them contributions from big business, but such matters should be beneath our P.M to take into consideration.
    We have shown him that the voters are willing and able to take his job away from him if he does not deliver. He now needs to consider whether the campaign donations he will receive from the banking industry are more important to him than the support of Australian voters.
    He will not be given another chance.
    By constantly changing the terms and conditions around Super and Pensions the government has just about destroyed its reputation as a retirement income builder, it's probably too late for Super, any further changes will probably finnish it off. I have supported Super Schemes all my working life and have done well with mine, but I have already advised my son not to put any more money than he has to in such an unstable investment medium. I guess more and more people will be driven to using the pension as their retirement plan.
    This reversal in personal financial responsibilities will mark this government as fiscally naive for decades to come, they are slowly strangling the golden goose.
    10th Sep 2016
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