AUSTRALIA - The wheels were finally set in motion to raise the contribution limit in Australia to 12% from 9% with the introduction of a new bill today.
The government has also indicated its plans to move completely away from a contribution age limit.
The much-awaited Superannuation Guarantee Amendment Bill was introduced by minister for financial services and superannuation and assistant treasurer Bill Shorten. It will gradually increase the superannuation guarantee (SG) rate from 9% to 12% over the course of six years, starting from 1 July 2013, a move the industry has been discussing since 2009.
Under the new bill, the SG will increase to 9.25% from 2013 and will increase by 0.5 percentage points until it reaches 12% in 2019.
The bill also proposes raising the SG age limit from 70 to 75. Under current legislation, an employer is only obliged to contribute to superannuation for employees under the age of 70.
However, in comments today, Shorten said he plans to completely move away from an age cap on superannuation guarantees.
The bill also outlines a proposed superannuation contribution tax rebate of 15% for low-income earners for contributions made on or after 1 July 2012. The passing of this bill will ensure that workers earning A$37,000 ($38,347) or less would receive a rebate paid to their super fund.
Shorten said: "Together with the low income superannuation contribution and Stronger Super package of reforms previously announced, the increase in the superannuation guarantee will improve the adequacy of retirement incomes and deliver a comfortable and secure retirement for current and future generations of Australian workers."
The changes to superannuation introduced by the bill are part of the most drastic reforms to the system since its inception 20 years ago.
Last month, Shorten announced plans to overhaul operations, governance, efficiency and structure of the industry. The So-called Stronger Super reforms outlined the creation of MySuper, a default, low-cost superannuation product that would launch from 1 July 2013. The legislation will also provide the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission and the Australian Taxation Office with increased powers to improve oversight of the superannuation industry.
(See related feature: Australian Government unveils plans for more efficient Supers)
Industry experts have largely supported today's developments.
Australia's largest super fund by membership, REST Industry Super's chief executive officer said: "The proposed increase in the SG from 1 July 2013 is extremely positive news for low-income earners and will have a truly positive impact on the adequacy of the retirement savings of those people most likely to leave the workforce with too little to show for their years of effort".
Challenger's chairman, retirement income and head of the 2009 Cooper Review on superannuation Jeremy Cooper has also welcomed the introduction of the bill.
"The two basic things we need to get right are saving enough and converting these savings to secure income streams in retirement. The lift to 12% and some policy work and consultation on secure retirement income streams will go a long way to ensuring that super lasts the distance for millions of Australians," said Cooper.
(Click here to see a full video interview with Cooper about MySuper and other reforms)
HMRC has confirmed providers operating relief at source pension schemes can continue to collect automatic tax relief at a basic rate of 20% under new Scottish Income Tax rules.
The Pensions Regulator (TPR) is seeking "improved" powers to set a schedule of contributions in defined benefit (DB) schemes in the government's upcoming white paper, it has revealed.
New regulatory rules which require providers and advisers to produce annuity illustrations will not solve the problem of consumer detriment as they are "fundamentally" flawed, according to Retirement Advantage.
Paul Budgen is set to join financial technology and auto-enrolment (AE) firm Smart Pension as director of business development.