Understanding the Impact of the Reduced Superannuation Contribution Cap
The task of preparing adequately for retirement becomes more difficult with every change to our superannuation laws, and any conversation about superannuation will generally illicit the admission that only the experts actually understand it. The whole issue is made more difficult by the fact that decisions made at this point in time will impact on the lifestyle retirees will have far into the future, so it is important that people in a position to top-up their superannuation make the effort to do so. The Superannuation Contribution Cap is a case in point, with upcoming changes reducing the concessional contribution cap from the current maximum of $50,000 for people 50 and over from 1 July 2012.
There is still time for anyone with an SMSF Brisbane (self managed superannuation fund) to make a substantial contribution to their fund, provided care is taken not to exceed the cap at its current level. From 1 July 2012, it is proposed that only people 50 and over with superannuation balances under $500,000 will be able to take advantage of the higher limit.
The over 50s still have time to check their superannuation contributions and take advantage of the cap as it stands. If there is a salary sacrifice arrangement in place, an upward adjustment of the amount is the best option to increase contributions, and if eligible, the other option is to make a personal deductible contribution. Ensure first that the cap is not exceeded by other concessional contributions such as the compulsory employer contribution, currently 9%.
In the future, superannuation will be the only source of income in retirement, so people under 50 must take more interest in their superannuation returns and attempt to understand changes and updates. The Superannuation Contribution Cap for people under 50 will be set at $25,000, unindexed, until at least 1 July 2014. While this is a substantial reduction from where it was, the magic of compound interest over time will make it well worthwhile to utilise the cap to its fullest advantage.
The changes to the concessional contribution arrangements mean that it will become increasingly difficult to accumulate substantial retirement funds through the vehicle of superannuation. The annual Superannuation Contribution Cap therefore becomes vital and the managers of Self Managed Super Funds Brisbane will need to be vigilant so as not to miss out on the benefits of making contributions.
Unfortunately, most people are very complacent about their superannuation funds, which is surprising given that they hold the key to a satisfying lifestyle in retirement. With a little more effort most people can achieve a reasonable level of understanding of the system and secure a comfortable future.
About the Author
It is very difficult to accumulate substantial retirement funds through the vehicle of superannuation. SMSF Brisbane is the best service provider for this.
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