Superannuation

Super funds are failing in their primary duty of understanding customers’ retirement income needs and aren’t doing enough to address known data gaps, the regulators said, criticising their slow progress under the retirement income covenant.

Approximately a third of SMSF holders under advice will be hurt by the new cap on discounted superannuation balances, the researcher says. A bump in the TBC cap will help some, but add to complexity for advisers.

The regulator, which is cracking down on financial product issuers for violating requirements and obligations around how they market to investors, issued its first stop order over a superannuation product, temporarily closing Spaceship Super to new investments.

The test allows investors who can certify that they earn $250,000 a year or have more than $2.5 million in net assets to access higher-risk securities normally off-limits to individuals. But many say the test is confusing and outdated, and an independent statutory body has called for an update.

While the move to tax superannuation balances above $3 million at a higher rate would affect only a handful of people at first, if the threshold is not indexed to inflation, future generations may be turned off from investing in their super, industry leaders say.

Younger Australians expect to retire earlier, and earn more in retirement, than older generations even as they redefine the traditional path to retirement by taking more career breaks, new Vanguard research shows – and these ambitious expectations may not be “aligning to reality”.

The federal government plans to use part of the $4.2 billion projected budget surplus to provide cost-of-living relief for Australian households and small businesses. It’s also moving forward with controversial plans to change tax concessions for the superannuation industry.

The regulator found 45 per cent of Choice super options underperformed the heatmap benchmarks in 2022, while one in five underperformed significantly. It also put trustees on notice that it’s stepping up scrutiny of poorly performing Choice products.

With the prospect of a recession in Australia still looming large, SMSF investors might take comfort in new research showing that while their sector underperformed APRA-regulated funds in a booming 2021, SMSFs weathered the last contractionary environment, in 2020, better than larger funds did.

Women continue to close the gap on men when it comes to superannuation, with new Roy Morgan research showing the gender gap in balance levels and super ownership declining over the past 10 years. But for the gap to be eliminated any time soon, the catch-up rate will have to greatly improve.

Treasury’s plan would increase the headline tax rate to 30 per cent from 15 per cent for earnings on superannuation balances above $3 million. The SMSF Association and others have called it unsustainable and discriminatory to SMSFs.

The changes to the Your Future Your Super performance test are an improvement, according to Willis Towers Watson. But the application of the test to trustee-directed products is probably more of a negative than a positive, and some benchmarks remain inflexible.