The government’s recent introduction of legislation to gradually increase compulsory superannuation contributions from 9 per cent to 12 per cent has generally been welcomed by the financial planning community. By increasing the Superannuation Guarantee to 12 per cent over ten years, Australians should feel encouraged to seek professional financial advice to ensure quality of life during retirement, ensure income adequacy, reduce longevity risk and decrease reliance on the age pension.
Without an increase in the superannuation guarantee, Mark Rantall, CEO of the FPA, noted that Australians will need to extend their working life to be able to retire on an adequate income, or will have to rely on the age pension. By 2047, ten years after maturation of the superannuation guarantee system, 75 per cent of the population will still be on some form of the age pension.
Richard Klipin, CEO of the AFA, also weighed in on the issue and noted that in lifting the Superannuation Guarantee Australians should be better prepared for retirement and relieve what had the potential to become a crippling tax burden for taxpayers.
However, as Minister for Financial Services and Superannuation, Bill Shorten, has noted many times in talking up the Future of Financial Advice reforms, only one in five Australians use the services of a financial planner. An increase in the Superannuation Guarantee means that Australians will have larger superannuation account balances – and this represents a prime opportunity for financial planners to deliver real value for their clients and assist them with the very real and pressing need to adequately prepare for retirement.
