Treasurer Morrison has thought through the 2016 Budget proposals on super and revised the package.  In summary:

·            The $500,000 Cap is out, but an annual cap of $100,000 is in

This applies to non-concessional super only and the $1.6m cap on tax-free pension funds will stay.  The annual cap has been reduced from $180,000 and it is still possible to contribute three years in one.

·            Catch-up concessional contributions to start 1 July 2018

This allows those who haven't used their $25,000 annual concessional contributions over a five year period to make a catch-up contribution later.

·            Reversal of work test

         The work test will stay for those between the ages of 65 to 74, requiring them to work 40 hours in a 30 day period to be able to make contributions.

·            Concessional cap $25,000

From 1 July 2017, the maximum annual concessional contribution will be $25,000, irrespective of age.

To put this in some context, did you know these facts about super?

·            The average balances for 45 – 54 year olds are $151,000 for males, $91,000 for females.  For those aged between 55 and 64 the balances are $322,000 and $180,000.

·            most people don't get serious about retirement planning until about three years before they plan to retire

·            the majority of retirees draw a pension, only 30% of benefits are taken as lump sums (mostly used to pay off a home or debt, invested elsewhere including bank, annuities or other super scheme, purchase a car, or for a holiday)

·            the average pension drawn is about $33,000 a year, or about 7% of the fund balance

·            over 50% of superannuants over 65 receive more than 50% of their income from government pensions or allowances

·            a man who turns 65 today can expect to live another 22 years, and a woman 24 years.

So how do you pay the bills for another 20 plus years?

·            Work out what you need a year

Say that's $60,000, which is not a lot.  Calculate the capital required assuming an annual earning rate of say 5%.  Remember to allow for inflation, which can halve the spending power of a fixed-rate pension over 15 years.  Where will the capital come from?  There are tables that calculate these; just call us if you would like a link to one.

·            Even better, get some quality advice.

Every bank or insurance company will happily take your money and promise to achieve the result you want.  Remember, it's not just about the return on your capital, it's also the return of your capital.  You need to factor in the proceeds of selling your business, perhaps downsizing your home, can you get more into super under the new rules, does it all have to be in super to get the best tax result, what government benefits might be available, consider the costs and management fees, etc.

There are some caring and knowledgeable financial planners who actually give quality unbiased advice, rather than sell the company's product.  (Ask us for a referral.)

·            Don't procrastinate.

It might be daunting to have to look at your financial prospects but the sooner it's done the more time there is to make the changes to better your situation.  Ignoring it is not an option.

Now you know what the Government's going to do, you know the average earnings and situation of retirees, and the benefit of quality planning.  Under the new financial planning rules accountants can't give financial advice (you can get a report for a considerable fee from a bank computer – good luck with that result!), but we can help you with the planning outline (how much do you need a year, how much capital is required, etc), and an introduction to a trusted planner .  We'd love to help you get the result you want for yourself.