Research by Rice Warner shows that people do not begin making significant voluntary contributions to superannuation until they reach their mid-50s – a reason why the government should increase the concessional contribution cap, says the SMSF Association.
In a statement, the SMSF Association said the government needs to increase the concessional contribution cap for people aged 50 and over and extend the carry forward of concessional contributions.
“The research confirms what the association has long been telling policy makers: that there is a sharp difference between compulsory and voluntary contributions to superannuation – the former increase gradually over time while the latter jump dramatically in the years leading to retirement,” said SMSF Association managing director and chief executive Andrea Slattery.
“This research graphically shows why people aged 50 and over need to have a more generous contribution cap than the $25,000 that will apply from 1 July 2017.”
The Rice Warner research used a sample of 14,351 SMSF funds provided to the association by BGL Corporate Solutions from its Simple Fund 360 SMSF administration software, the statement said.
It found that if the carry forward concessional contribution limit was increased from a balance of $500,000 to $750,000, it would benefit 13 per cent of the members in the sample, of which half would be female.
Rice Warner chief executive Michael Rice said the purpose of the research was to measure the impact of recently proposed legislative changes to tax treatment in superannuation on SMSF members and potential refinements.
“The three most significant of those proposed legislative changes were: the introduction of a $1.6 million cap on the amount that can be transferred from accumulation accounts to pension accounts, the reduction of the concessional contribution cap to $25,000 from $35,000 and the introduction of a $100,000 yearly non-concessional contributions cap (restricted to those with balances under $500,000),” he said.
“The research shows that the proposed changes will have a material impact on the SMSF population and will restrict members’ ability to save in superannuation.”
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