“It’s the first budget in years where superannuation has not been the target of tinkering,” proclaimed John Brogden, the CEO of the Financial Services Council (FSC).
Although the 2014 Federal Budget is sure to have left many bitterly disappointed – the sick, university students, high income earners, public servants, local councils, indigenous people and pensioners just to name a few – at the very least it’s left super alone, say financial services representatives.
The FSC has praised the government on delivering its commitment to make no negative changes to existing superannuation arrangements.
Brogden is particularly pleased that it has pledged to increase the Superannuation Guarantee Charge to 12%, although he’s not so happy that it will be paused at 9.5% for an extra year until 2018.
It will then be increased 0.5% a year until reaching the 12% limit.
The Association of Financial Advisers (AFA) has also stated that it’s “pleasing” to see that the pre-election superannuation promise has been honoured.
“Bringing legislative stability to superannuation is essential to building trust and confidence in superannuation as the preferred saving vehicle to fund retirement,” CEO Brad Fox stated.
However, he acknowledged that the impact of the budget measures will hit those most in need of financial advice - welfare recipients and middle income earners - the hardest.
It may affect their ability to afford personal insurance, fund financial investments, and make additional contributions to super, he said.
The access age for age pension being lifted to 70 by 2035 could be a precursor to a raise in the age people can access superannuation in coming years, Fox said, providing a more urgent reason for people to build assets outside of superannuation.
He added that reductions in spending on ASIC, which is set to lose hundreds of staff members and save $120 million over five years, could be give impetus to greater self-regulation within the financial advice industry.
“We expect the Financial System Inquiry to provide further opinion on the appropriateness of self-regulation.”
The Financial Planning Association (FPA) has also welcomed some of the federal budget amendments.
In particular, it supports the revelation that the government will now allow people to withdraw any excess contributions and associated earning made after 1 July 2013 which currently breach the non-concessional cap, without repercussions.
FPA general manager of policy and conduct Dante De Gori said financial planners will play a pivotal role in explaining to their clients the choice between leaving the excess contributions in the fund, or withdrawing them.
“Financial planners will be able to help clients navigate excess contributions to ensure they are not negatively impacted as may have been the case in the past,” he said.
But De Gori wasn’t quite as optimistic about the ASIC cutbacks as the AFA.
He said the FPA would be keeping a close eye on the impact to the funding in respect to any adverse effect in terms of licensing costs for financial planners.
“We will also seek to ensure no impact on the regulator’s services and capacity to monitor and supervise the industry,” he said.
To assist financial planners digest details of the budget, De Gori will be holding a webinar at 1pm Sydney time today.
Attendees will have the opportunity to ask questions live.