Over the past few years, more thought has been given to retirement income strategies, but the market is still relatively immature in terms of solutions available. Now, Australia’s ageing population and increasing life expectancies are bringing the post-retirement market to the forefront.

Click here to read the full report from PIMCO.

The post Retirement income options: The next step for Australia appeared first on AdviserVoice.

SGC inputs up due to the recent increase to 9.25%.

Employers paid a record $15.57 billion into employees’ superannuation accounts in the third quarter of 2013, reflecting the rise in the Superannuation Guarantee to 9.25%, according to gross domestic product (GDP) statistics released today by the Australian Bureau of Statistics (ABS).

The data also showed record amounts poured into technology as Australian businesses sought efficiency gains.

DST Bluedoor, a leading global provider of IT solutions for the wealth management industry, said rapid growth in the nation’s retirement savings pool is forcing greater investment in technology by superannuation funds to drive product innovation and productivity gains.

ABS data reveal superannuation contributions made by Australian employers rose 1.2% during the September quarter to a record $15.57 billion from $15.38 billion in the second quarter of 2013. Contributions were up 4.6% from $14.88 billion a year earlier. Employer contributions include Superannuation Guarantee (SG), salary sacrifice and voluntary employer contributions.

Reflecting the rising importance of technology within the economy overall, the seasonally adjusted private software spend rose 1.6% to $3.07 billion in the third quarter of 2013 from $3.02 billion in the second quarter, and jumped 8.1% from a year earlier. The report also indicated that the IT spend has hit record levels for several quarters.

The ABS data has revealed national productivity, as measured by GDP/hour worked in seasonally adjusted terms, did not grow during the third quarter and was up just 0.9% from a year earlier, highlighting a lacklustre performance. The Australian economy grew 0.6% during the September quarter, to be up 2.3% from the September quarter in 2012.

Martin Spedding, Executive Director with DST Bluedoor, said the growth in superannuation savings would force wealth and asset managers to become more efficient, as they seek to keep up with greater regulation and rapid technological changes.

“The nation’s superannuation savings pool is rapidly rising in value, and we can expect it to reach $2 trillion in 2014, from $1.75 billion in the September quarter this year, driven by growing compulsory superannuation contributions and rising asset values. This is forcing superannuation funds, wealth managers and administrators to upgrade their technology solutions to seek efficiencies and automate manual processes,” said Mr Spedding.

“Over the past year, we’ve seen a rise in technology spend by superannuation funds and other financial service organisations and we expect this trend to continue. Indeed, financial service organisations are making solid productivity gains, unlike many other sectors of the Australian economy where productivity has fallen.

“Greater regulation of the superannuation sector through SuperStream regulation and APRA data reporting is only adding to the pressure on superannuation funds to upgrade their technology systems and become more efficient,” Mr Spedding said.

“The superannuation industry, like the banking sector, must improve the consumer experience. Investors are demanding more efficient delivery of financial information, real-time transacting and are using mobile devices more and more. Superannuation funds must meet these challenges in 2014 in order to stay competitive,” he said.

Mr Spedding said DST Bluedoor’s aim is to continue to deliver innovative software solutions for the financial services industry that helps clients grow revenues and significantly cut costs.

The post Super Guarantee hike leads to record $15.57 billion in employer super contributions appeared first on AdviserVoice.

John Brogden

The Financial Services Council has commended the Government for confirming its commitment to increase the Superannuation Guarantee Charge (SGC) to 12 per cent as part of its repeal of the Mineral Resources Rent Tax (MRRT).

“The Government has a clear mandate to repeal the MRRT whilst retaining the key policy of increasing super contributions to 12 per cent by 2021”,  John Brogden, CEO of the FSC said.

“FSC research demonstrates that there is a retirement savings gap of over $1 trillion. Increasing superannuation contribution rates are critical in closing this gap and ensuring more Australians have adequate retirement savings.”

“The repeal of the MRRT contributes $13 billion of savings to the Budget over the forward estimates and is an important step in establishing structural balance in the Budget. The repeal of the MRRT works in tandem with an increase in the SGC, which will reduce the Budget impact of an ageing population over the long-term.”

“Today’s announcement removes any doubt that the Government is committed to promoting certainty and stability in superannuation policy and will increase the SGC to 12 per cent.”

The post FSC commends government commitment to superannuation appeared first on AdviserVoice.

If you think the Government is paying, think again.  There may have been a misunderstanding, that when it was introduced, the mining tax was going to fund the increase in superannuation.  Simply, that is not the case.
 
The IPA is not opposed to the gradual increases in the SGC rate, however, people should think about how those increases are going to be funded.  The Government is not funding any of the increase in super.
 
The truth is the only cost to Government is the opportunity cost of more dollars feeding into the concessional superannuation pool. 
 
Whenever a dollar of wages is re-directed into super, the Government collects less revenue as the 15% tax rate imposed on super funds is less than the average marginal tax rate on wages and salaries.
 
“There are only two possible avenues for funding the increase in the SGC; one, employers will do so, adding to their cost structure or two, employees must sacrifice some of their pay packet,” said IPA chief executive officer, Andrew Conway.
 
“Where an employee is expecting an annual incremental pay increase, they may be well disappointed when they realise that they have to fund the SGC rate increase themselves.
 
“Most employers work on a total cost of employment basis which includes super and therefore, future pay increases will be partially offset by higher super contributions.
 
“We are also concerned as to how small businesses will manage these changes; many are struggling to make ends meet as it is.  Just ask the question of a retailer paying award rates to employees, how they will continue to do so and remain competitive,” said Mr Conway.
 
The SGC is to be increased gradually up to 12 per cent by 2019 adding to the many cost pressures facing small business owners.
 
This is one of the reasons why the IPA is calling on the Government to introduce a concessional tax rate for small businesses (see release 18 March 2013: Tax offset for small business a must) to stem the rapid flow of small business closures and support this sector from significant headwinds.

The post Who is really paying for higher super contributions? appeared first on AdviserVoice.