Is superannuation a flawed retirement strategy?

The frenzy and speculation currently being created in the media around superannuation, retirement and age pension is nothing unusual. Over the years there has been a constant parade of legislation which has been introduced and passed, all in the spirit of refining the “Three Pillar Retirement System”.

If you are extremely desperate and have a couple of hours, you can go to the Parliament of Australia website and search through the library for a list of the legislative changes and parliamentary committee reports that relate to Superannuation and Age Pension. You will notice that between 1900 and 1973 (the year I started work) there were some legislative changes, but nothing in comparison to the changes since 1983.

To give you an idea, of the 57 pages outlining the legislative documents and committee reports since 1900, 51 pages (90%) refer to the changes since 1983.

What does this all mean for you and me? Well, change is constant and that should come as no surprise. It does not mean, as I have heard some people say, that superannuation is a flawed method of saving for your retirement.

I believe the government’s objective, along with any speculated legislated change, is to ensure we view superannuation as it was originally intended, the vehicle of choice for retirement planning and not necessarily the vehicle of choice for tax planning.

The balancing act for the government in any legislative reform will be ensuring that superannuation remains an attractive option for people planning and saving for their retirement. And that it does not become so onerous and complicated that people lose confidence and no longer see any value in planning and saving for their retirement.

The legislative changes that have occurred over the years have not been confined to superannuation. During this time, the age pension has also been subject to constant refinement; from removal of the means test for those retirees over the age of 75 in 1973, to the abolition of the assets test completely in 1976, the reintroduction of the assets test in 1984, through to the future changes to the assets test from the 1st of January 2017.

The constant merry-go-round of changes makes it hard for the public, and their professional advisers to implement a rock solid plan that will guarantee you the income you wish for in retirement.

You’ll note I said hard….. not impossible.

Let me emphasize. It is extremely important to have a plan and review that plan on a regular basis, taking into account the legislative changes and the movement in investment markets. Implementing a plan when you are 50 and then not reviewing it until you retire at 67 or 70 will, I am sure, result in some very disappointing outcomes.

If you don’t believe you have the time to review your plan or you are unsure of what the legislative changes will mean for you, make sure you talk to an expert. Someone suitably qualified to provide sound advice and assistance. Don’t rely on your well-meaning neighbour, or the proliferation of tele-experts on your favourite current affairs program, or someone you have spoken to at a party or barbeque.

Regardless of the current frenzy of speculation over possible future legislative changes, one fact remains: a well-researched and professionally prepared plan is a must to ensure your retirement is all you wish for.

The Realise Your Dream blogs are written by Peter Kelly and Mark Teale. More information about the authors can be found here