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Budget delivers key initiatives but is a blow to retirement savings
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The Financial Planning Association of Australia (FPA) has welcomed a number of improvements announced in the May 2009 Budget.
Initiatives such as the increase in the weekly pension, the introduction of paid maternity leave, temporary drawdown relief for pensioners and the preservation of the Commonwealth Seniors Health Care Card income test are all welcome.
However, superannuation changes that became effective only two years ago have been used to fund some of these initiatives and this is a disappointing outcome.
It is important to build a savings culture among Australians by providing people with incentives. Tinkering with superannuation undermines confidence in superannuation and we need to work hard to ensure that people remain committed to preparing for a better retirement, CEO Jo-Anne Bloch said.
While the FPA is disappointed the Super Guarantee will remain at 9%, the FPA understands this is a measure reflecting the difficult current economic circumstances.
The budget has not provided any incentives for lower income earners to save through superannuation, even though the co-contribution reduction is temporary, and it has removed contribution incentives for higher income earners to save for retirement.
Long-term, this will encourage dependency on the age pension creating a strain on a system designed to help those who really need it.
Ms Bloch said Australians will now find themselves staying in the workforce longer, working to build their wealth before the 2023 date set for the age pension increase announced in the Budget.
Increasing the pension age to 67 by 2023 will have a significant impact on people planning to retire. The FPA is urging Australians to seek financial advice sooner rather than later following the budget announcement, Ms Bloch said.
The increase in the retirement age, phasing in over the next 14 years, serves to set the retirement date rather than provide incentives for Australians to defer their pension voluntarily, as recommended by the FPA in our submission to the Retirement Incomes Review. (FPA Retirement Income Submission)
Financial planners will be talking to their clients today about the changes, and how strategies can be adapted to ensure plans remain on track.
CERTIFIED FINANCIAL PLANNER professional and FPA Member, Neil Kendall said most people will need to review the changes and the likely impact on their personal cashflow.
For those planning for retirement, they will probably need to reassess their strategy and make adjustments to accommodate the budget changes, Mr Kendall said.
People should visit a financial planner to ensure they are making the most of their financial situation before changes are brought in. People may not be aware of the benefits they can receive.
Consumers can visit the FPA website for a budget summary or visit the Good Advice website for general financial advice (www.goodadvice.com.au).
We would urge the Government to review the SG contribution level, and other incentives to improve our savings culture, when economic recovery is well underway. (FPA Pre-Budget Submission)
The FPA will continue to work with Government to ensure the Australian Superannuation structure remains a viable method of saving for retirement.
ENDS
Media Contact
Daniela De Lucia - Jackson Wells
P: 02 9904 4333 | M: 0421 792 765 | E: ddelucia@jacksonwells.com.au
Note to journalists
The Financial Planning Association of Australia (FPA) is the peak professional body for financial planning in Australia. It has a network of 31 Chapters across the country, which provides business and professional development activities for more than 12,000 members. FPA practitioner members manage the financial affairs of more than 5 million Australians whose investments are valued at $630 billion.
CFP® and CERTIFIED FINANCIAL PLANNER" are certification marks owned outside the US by the Financial Planning Standards Board Ltd (FPSB). Financial Planning Association of Australia Limited is the marks licensing authority for the CFP marks in Australia, through agreement with FPSB.
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