On February 10 the much-delayed Enhancing Superannuation Outcomes Bill was passed by the Federal Parliament and will come into effect on the 1st July 2022.
There are two important features of this legislation that you need to know.
Firstly, all your wage or salary earnings are now ‘captured’ by the 10% Superannuation Guarantee Contribution (SGC) levy. This is because the previous threshold for employers to pay the SGC (for those earning more than $450 per month) has now been removed. This threshold meant that employers were not required to pay the SGC on behalf of workers earning less than this amount – typically those in the ‘gig’ economy, or those working two or more jobs.
It is estimated some 300,000 workers will be better off – particularly women who represent 63% of those who previously missed out.
This change will also help to foster gender equity in superannuation over the longer term with many women having superannuation savings for the first time in their lives.
Secondly, of interest to the wider retiree sector (including those who are already retired, whether Age Pensioner or self-funded) is another section of the bill which directly addresses the decumulation phase of retirement – we explained decumulation in some detail in an article last year so click here to find out more.
Essentially this measure means that all superannuation funds, excluding SMSFs, are now required to consider the needs of their beneficiaries in retirement. In addition the also recently passed Retirement Income Covenant requires the fund trustees to share a formal retirement income strategy which demonstrates how they will assist their members to:
- balance maximising retirement income
- manage risks to income, and
- retain flexible access to savings.
Says Minister Jane Hume who announced the passing of the bills,
‘It will give retirees confidence to spend their superannuation savings, while enabling choice and competition in the retirement phase of superannuation’.
But should retirees beware?
The purpose of the Retirement Income Covenant is clear and in a perfect world it should provide clarity for those who are entering the decumulation phase of retirement. But some media commentators have noted that this legislation may also lead to a proliferation of retirement income and drawdown products and perhaps even add to the confusion of those seeking to combine an Age Pension and/or other income streams. The super funds will be required to have a written strategy and summary available publicly by 1 July, 2022. It is to be hoped these summaries are written in plain English whilst still detailed enough for fund members to weigh the pros and cons of the strategy on offer.
As always, the team at Retirement Essentials believes that it is better to be safe than sorry.
Weighing up a retirement strategy and its relevance to your specific situation is the most important consideration. For this reason our adviser consultations offer strong professional support to help you work your way through issues of concern when planning or reviewing your retirement income options.