Super may have lost its lustre

With the myriad of changes in superannuation circles since the first of the taxing legislation was introduced in 1983, a number of people have questioned the efficacy of superannuation as an investment vehicle.

Financial commentators and members of the public alike have aired their views about superannuation and come away with differing conclusions.

One inescapable conclusion that they have all come to, however, is that, for most Australians, superannuation savings and the family home still make up the largest part of their assets.

In particular, the bulk of our retirement income will be funded from our superannuation system because superannuation is still the most tax preferred investment vehicle available to us.

The contributions made to the superannuation funds can be deductible depending on your employment circumstances.

The earnings and contributions may only be subject to a 15 per cent tax and the payouts from a superannuation fund are treated concessionally for tax purposes.

There is no other arrangement that offers these tax concessions.

The introduction of the GST from 1 July 1999 will, due to the reduction in marginal tax rates, make superannuation less attractive for some people on lower income levels.

The major negative aspect of superannuation taxation legislation is the superannuation surcharge. This would rate as one of the most ill-conceived and poorly implemented pieces of legislation in recent years.

By raising the tax rate on contributions to 30 per cent, the government has really brought the tax efficiency of superannuation into question for some people.

At a time when Australians needed encouragement and incentive to fund their own retirement this piece of legislation removed a considerable part of the incentive.

How much superannuation we need is dependent essentially on our lifestyles.

It is considered that if the only contributions that were going to a superannuation fund on your behalf was the superannuation guarantee charge (currently at 7 per cent of your salary), then an entire working life of this contribution will result in a payout in retirement of approximately 40 per cent of your pre-retirement income.

To determine whether this is sufficient to sustain your lifestyle, examine your expenditure pattern at present. Are you saving 60 per cent of your income? If not, then you do need to be making some contribution to your superannuation fund to supplement the superannuation guarantee charge that your employer is making on your behalf.

The most compelling reason for investing in superannuation is that, with the aging population, governments are not going to be able to indefinitely fund pensions.

This means that we have to take control of our own retirement funding.

For too long, many of us have left this issue to others and have abrogated our responsibility to review our own arrangements. This is beginning to change and will lead to more lucrative and successful retirements for a number of Australians.

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