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.
What is being done about raising the income threshold so more self funded retirees are eligible to receive the Commonwealth Seniors Card
It is most unfair that those that saved for their retirement are penalised and have to pay more for their medications etc
Everyone should at least get the health concession card when they retire. Everyone should also get the pension – same as other countries but I won’t hold my breath on that one.
I agree you save all your life pay huge taxes to fund pensioners retirement and get nothing back
Better off not working from the start and let everybody pay for you
I don’t know what the fresh holds are for a health care card but I’m making enquires
Hi Laurie. This page will help you with the thresholds
You should be rewarded for your efforts to be financially independent in your retirement, not penalised.
Hi Lynn,
I am also in the same boat as yourself; having saved for my retirement instead of splashing my earnings and dependent fully on the Centrelink Pension. Self Funded Retirees are not only deprived from receiving al least a Part Pension; we don’t qualify for the Commonwealth Seniors Health Card and did not receive any of the COVID-19 stimuluses or Utilities Subsidies.
Unfair and discriminatory, in my view.
I am Adrian Rodrigues, a Self Funded Retiree. As the above have stated, I too limited and ‘controlled’ my spending in order to put away as much as possible towards my retirement; but I now find that I ‘made a mistake’. I should have splashed my earnings and enjoyed living more rather than saving. I now receive a fortnightly pension from my Super fund; but to my bad luck it is slightly higher than the Centrelink limit to qualify for the Aged Pension. It is more painful not to even qualify to receive the Commonwealth Seniors Health Card.
In my view, it is blatant discrimination against those retirees who were frugal and thoughtful in saving for their retirement.