Super industry heads have responded to yesterday's MYEFO announcement from the Government with concerns raised about the reliance of super products on the equity markets.
As reported yesterday by Financial Standard, Treasurer Wayne Swan released the 2011 12 Mid-Year Economic and Fiscal Outlook (MYEFO) which included the extension of a draw-down relief for account-based pensions, something which Cooper said highlights serious superannuation flaws.
As Challenger's chairman of retirement incomes, Cooper said this fifth consecutive government rescue effort highlighted the need for super products capable of properly managing market, inflation and longevity risk, not just those that rely on equity markets.
"While market-linked 'pensions' invested heavily in equities were the most popular retirement product in the bull market they can't be relied on to provide bedrock or lifetime retirement income, and need to be supplemented with fixed income investments capable of providing guaranteed income payments each month."
Treasury said it would extend the drawdown relief for account based pensions in 2012-13, with a 25% reduction in the minimum payment amounts for these products. It has halved the minimum payments every year since 2008 and was due to return these to normal this year but has not done so due to market volatility.
The Association of Superannuation Funds of Australia (ASFA) said it was disappointed in the Government's decision to delay the increase in the superannuation contribution cap for those aged under 50 for another year, however overall it welcomed the MYEFO decision to allow the Australian Taxation Office (ATO) to auto-assess the entitlement of low-income earners.
The Self-Managed Super Fund Professionals' Association of Australia (SPAA) echoed similar sentiments at the suspended indexation of the annual concessional superannuation caps. This will mean the annual concessional cap for those under 50 will remain at $25,000 until June 30 2014.
"As it will impede individuals' ability to voluntarily save for retirement, potentially worsen the excess contributions tax (ECT) problem and may even reduce confidence in superannuation as a savings vehicle."
Meanwhile the Small Independent Superannuation Funds Association (SISFA) was pleased with the Government's decision to continue drawdown relief for self-funded retirees.
"Continuation of drawdown relief for self-funded retirees is a welcome decision for trustees who are seeing their SMSF balances still being battered by equity markets," said Michael Lorimer, chair of SISFA.
"The Government is recognising the reality of the world situation for SMSF trustees and is doing their part to help."