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shakes up pensions savings rules
By Virginia Marsh in Sydney, Financial Times
Australia is to
reduce its much-criticised superannuation surcharge on high-income
earners. Also, in an attempt to encourage pension saving among poorer
Australians, the government will match contributions for low earners.
The Investment and
Financial Services Association, an industry body, hailed the moves - first
mooted during the 2001 election campaign but held up by political
disagreement - as "the most significant breakthrough in
superannuation tax in 15 years".
assistant treasurer, said that as a result of a compromise deal reached at
the weekend with the Democrats, the 15 per cent surcharge on pension
payments for those earning over A$90,500 (US$58,820) would fall from 15 to
12.5 per cent over three years.
In addition, Ms
Coonan said those on incomes of up to A$27,500 would have their
contributions matched dollar-for-dollar up to A$1,000 a year by the
government, with smaller co-contributions also payable to those earning up
Some 4.6m low income
earners are expected to become eligible for some form of co-contribution
under the plan. "[The] co-contribution would allow a low-income
person, who puts A$20 a week into their superannuation, to add A$45,000 to
their superannuation pay-out in just 15 years, and to add A$146,000 over
30 years," said John Cherry, the Democrat senator who negotiated the
average worker's superannuation balance only $56,000 at present, the
co-contribution has the potential to significantly boost the retirement
savings of low-income Australians."
The Democrats pushed
for the full co-contribution to be available to those earning up to
A$27,500 rather than up to A$20,000 as the government first proposed. In
return, they softened their opposition to a reduction in the high earner
surcharge, although this will fall by just 2.5 percentage points rather
than the 4.5 percentage points initially planned.
has mandatory superannuation with employers obliged to set aside the
equivalent of 9 per cent of an employee's salary into a pension fund.
However, most Australians still need to make voluntary top-up payments to
fund their retirement adequately.