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AMP adviser raises contribution cap concerns

A “catch-up” contributions cap for superannuation is needed for people with broken work patterns, as the current cap is not high enough to impact account balances, according to advice firm FMS Group.

Weighing into the contribution caps debate, adviser Christine Hornery of AMP-aligned FMS Group said the new higher contributions caps for superannuation which took effect on July 1 does not go far enough for people who spend prolonged time out of the work force.

“If a person takes say 10 years out of the workforce, then for 10 years that person usually has no money going into their superannuation account at all,” Ms Hornery said.

“Currently, there is no provision for these people to ‘catch up’ once they return to work.”

“They are caught under the same concessional, and for that matter non-concessional, contribution limits as a person who has spent a lifetime in the workforce.”

Ms Hornery said the introduction of a concessional contributions cap for people who spent significant time out of the workforce would help accelerate super balance.


She added that the measures would go some way to helping the one third of all women who said they have no super whatsoever, in ASFA’s March 2014 update.

“People can make non-concessional contributions to their superannuation up to a new, higher cap of $180,000 per year; however, where these contributions do come from after-tax income, they are not as tax-effective as when they come from before-tax income,” Ms Hornery said.

“People starting from so far behind the eight ball need as much favourable tax treatment as possible – which is why they need a higher concessional contributions cap.

“We need to be putting in place initiatives to encourage women, particularly those who have spent a long time out of the workplace, to place as much as they possibly can in superannuation for retirement and, given the huge burden these people are likely to become on Centrelink when they retire if we don’t, we need to do it now.”