Big changes ahead for super

THE recent announcement of changes to superannuation by the federal government won't come as a surprise to many Australians.

Hardly a year goes by without our system of retirement saving being fine-tuned. But super is your money and that makes it worth having a reasonable idea of some of the reforms about to impact superannuation.

Assuming none of this changes again following the September election, one of the key initiatives announced a few weeks ago will see people pay tax at 15% on superannuation earnings in excess of $100,000.

The measure won't take effect until 1 July 2014, and it's likely to affect around 16,000 Australians. Yet other changes are about to be introduced that will impact many more workers.

From 1 July 2013, super funds will start to offer a new type of super account called MySuper. 

This will replace 'default' accounts - those super funds chosen by employers when an employee doesn't nominate a fund of their own.

You would think that when it comes to something as important as our long term savings, which is what superannuation is, most people would take an active interest in where their money goes.

In fact, that's often not the case. About 80% of workers let their employer make that decision, and so a vast amount of money ends up in default funds.

The trouble with the current system of default funds is that it's something of a lucky dip as to whether the fund's investment process suits your goals and needs, or whether the fund charges above-average fees on your retirement savings.

The whole point of MySuper is to provide a simple, low cost super fund for those workers who don't nominate their preferred fund.

It's worth clarifying that MySuper is not a new type of superannuation scheme. Instead, it is an option that will be offered by most existing super fund managers and it may be marketed under a variety of names.

The common thread is that MySuper accounts will provide a basic investment service and charge minimal fees. Its intent is that more of your super savings will be invested and allowed to grow so that you can enjoy a better lifestyle in retirement.

Other changes will also take effect from 1 July 2013.

Notably, your employer must pay more into your super each year, with compulsory contributions rising from the present 9% of your base wage or salary up to 12% over the following seven years.

It's a reform that recognises many of us will need a lot more to live on in retirement than our current rate of super contributions will provide.

The start of the new financial year will also see the upper age limit on employer super contributions removed. This means you could still be eligible to get super from your employer if you're 70 or over and still working.

It's a tremendous incentive for seniors to keep their hand in the workforce if they choose to.

I have no doubt the latest round of super changes won't be the last.

The key thing is that super is your money for the future, and taking an active interest in where - and how - it is invested will pay dividends in retirement.

Paul Clitheroe is a founding director of financial planning firm ipac, chairman of the Australian Government Financial Literacy Board and chief commentator for Money magazine. Visit for more information.

Birth of single malt whisky documented on new film

Premium Content Birth of single malt whisky documented on new film

A Northern Rivers distillery will hold a tasting and screening of The Water of...

25 fireys needed to put out blaze at recycling plant

Premium Content 25 fireys needed to put out blaze at recycling plant

On route fire crews noticed large volumes of smoke.

Scenic wedding venue operating for years without approval

Premium Content Scenic wedding venue operating for years without approval

The owners are meanwhile proposing glamping facilities