Andrea Slattery

Adequate superannuation contribution caps are critical to allow people to build healthy retirement savings, says a new research report commissioned by the SMSF Association and the actuarial firm Rice Warner in conjunction with BGL Corporate Solutions.

The preliminary findings from the report conclusively show how SMSF members make “catch-up payments” later in their working lives when they are financially able to do so.
The report, which will be released soon, uses data from 14,000 SMSF members to analyse fund contributions patterns.

SMSF Association CEO/Managing Director Andrea Slattery says: “This is an important piece of research that demonstrates the importance of concessional caps to allow people to top up their payments later in their working lives to ensure they are self-sufficient in retirement.

“The research clearly shows there is strong increase in SMSF member contributions to superannuation after entering their 50s and then through to their early 70s.

“This supports the Association’s long-held belief that most people make significant contributions to build their retirement savings later in their working life.

“Without sufficient contribution caps to allow people to make the necessary contributions to their superannuation, these catch-up contributions will not be made, reducing people’s ability to achieve adequate superannuation savings to rely upon on retirement.

“Any move by the Government to reduce concessional contribution caps will undermine people’s ability to build adequate savings to use in retirement, with the inevitable effect of increasing their reliance on the age pension.”

Slattery says the report also supports the Association’s calls to allow the carry-forward of unused contribution cap amounts to allow people to make catch-up contributions to super.

“This is especially relevant for people with broken work patterns, such as women taking time out of the work force to raise children. The research shows that females start making catch-up contributions earlier than males, and this should be catered for by adequate and flexible contribution caps.”

Graph RW1

RW1 shows the value of contributions by SMSF member age group. This graph shows that people dramatically increases their personal contributions to superannuation (i.e. voluntary salary sacrifice or personal deductible contributions) from 55 onwards. This means people need adequate contribution caps to make the catch-up contributions that are made later in life when people may have greater financial scope to boost their retirement savings.

Graph RW3

RW3 shows the gender breakdown on personal contributions to super. It reiterates that people start ramping up extra contributions to super later in life and also shows that women start making increased personal contributions to super before men do. This reflects the gender gap in super caused by broken work patterns and restates the need for adequate caps, so people with broken work patterns can catch their retirement savings up.

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