Retirement Increasing Returns in Super FundsRetirement Increasing Returns in Super Funds Two of the greatest drags on accumulating superannuation savings are fees and taxes. There's little likelihood of taxes falling in the foreseeable future, but there is hope that competition among super funds will lead to fee reductions before legislation comes into effect next July enabling employees to choose the fund to which their employer makers super contributions.
Retirement Increasing Returns Con'tMal Brough, the federal Minister for Revenue and the Assistant Treasurer, says super adequacy has been addressed through a number of recent legislative initiatives - including choice of fund (putting downwards pressure on fees) and a co-contributions scheme to enable lower-paid workers to get more money into the system. But Brough says that at a more fundamental level, there needs to be a greater education and financial literacy in the community about Retirement Increasing Returns. "First of all, they have got to have confidence in the superannuation system, and they have to have an understanding of financial literacy so that they can make good decisions and they are making conscious decisions to take up the Government's incentives," Brough says. "But we need to ensure that people's thinking about superannuation starts before they leave school." Brough says a cut in the ongoing fees of a super fund has a far more marked impact on someone's end retirement benefit than a much larger cut in the contributions tax. He says Treasury figures show that someone earning $25,000 a year and receiving 9 per cent super guarantee contributions each year, for example, could expect to accumulate a real (that is, adjusted for inflation) accumulated benefit of about $123,255 by the time they retire. (The example assumes investment earnings of 7 per cent a year and salary growth of 4 per cent a year). A cut of just 0.2 per cent in the fees charged by the person's superannuation fund could add $3660 to their real end benefit. On the other hand, a 2 per cent cut in the contributions tax (from 15 per cent to 13 per cent) would increase the real final benefit by only $2900. Retirement Increasing Returns and co-contributionsThe co-contribution scheme has an even greater effect. If the person could contribute just $5 a week from their own pocket, it would attract a $7.50 co-contribution from the Government, and over a 30-year period their real accumulated benefit would increase by more than $27,000. "The contributions tax has a minimal impact on the people we are trying to help the most," Brough says. "For low- to middle-income earners, using the co-contributions has a greater impact than a reduction in the contributions tax. A reduction in fees has a much greater impact than a cut in the contributions tax, as well." Retirement Increasing Returns Story Ends ++++++++++++++++++++++++++++++++++++++++ Get My Free Report "Superannuations Secrets" Learn now I took my super fund from $16k to $250k and growing in just a few smart moves.
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