Retirement Income Streams and Superannuation

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Questions and Answers

What is the primary driver of the increasing proportion of retirees to workers?

Increased life expectancy (correct)

Higher birth rates among retirees

Decreased immigration rates

Lower death rates among infants

As of 2020-2022, how much has life expectancy at birth decreased for both genders?

0.5 years

0.4 years

0.2 years

0.1 years (correct)

What trend is indicated by the life expectancy statistics over the previous 10 years?

Life expectancy at birth has not changed significantly

Life expectancy for females increased by 1.2 years

Life expectancy for males decreased by 1.6 years

Life expectancy for both genders increased (correct)

How has the demographic structure of the population been affected by increased life expectancy?

The population is aging with more individuals living longer Signup and view all the answers

What is the post-retirement life expectancy increase trend for both genders?

It has increased similarly to life expectancy at birth Signup and view all the answers

What has been the effect of the SGS on national savings?

It has raised national savings by over 10%. Signup and view all the answers

What must employers do regarding contributions under the SGS?

Deduct 11.5% from employees' gross salary. Signup and view all the answers

If an employee has an existing super fund account, where will their SG contributions go?

To their stapled super fund account. Signup and view all the answers

What is required for a contribution to a super fund?

It must be new money paid into the fund. Signup and view all the answers

What happens if an employee does not have an existing super fund account?

Employers will create a new account for them. Signup and view all the answers

Which of the following is NOT a way to contribute to a super fund?

Through tax deductions specifically for retirement. Signup and view all the answers

Which statement about allowable contributions to super is true?

Contributions can be made from salary packages or personally. Signup and view all the answers

What is a rollover in the context of superannuation?

The transfer of benefits into another fund. Signup and view all the answers

What is a key characteristic of Defined Contribution (DC) plans?

They provide an accumulated amount based on individual contributions. Signup and view all the answers

Why is the retirement lump sum uncertain for most workers in Australia?

Recent retirees lack participation in adequate schemes. Signup and view all the answers

What percentage of an employee's gross salary is initially required to be deducted for superannuation contributions?

3% Signup and view all the answers

What is the primary feature that defines a Complying Superannuation Fund (CSF)?

It must be regulated and controlled in Australia. Signup and view all the answers

Under what circumstances can an employee access their accumulated superannuation balance?

Only after retirement and after reaching preservation age. Signup and view all the answers

What will occur if social security retirement benefits are phased out completely?

It's unlikely to happen in the foreseeable future. Signup and view all the answers

What investment choice do employees have in relation to their superannuation contributions?

They may choose the specific investment fund or default to MySuper. Signup and view all the answers

What is a significant requirement for a fund to be classified as a regulated superannuation fund?

It must comply with the SISA and confirm regulated status. Signup and view all the answers

What is the maximum amount of concessional contributions a fund can accept per year?

$30,000 Signup and view all the answers

Which of the following contributions is NOT considered a concessional contribution?

After-tax contributions Signup and view all the answers

At what age can one still make concessional contributions without restrictions?

Under 65 Signup and view all the answers

For employees aged between 65 and 70, under what condition can concessional contributions be accepted?

If they are gainfully employed at least part-time Signup and view all the answers

What is the tax rate applied to concessional contributions made to a superannuation fund?

15% Signup and view all the answers

What kind of contributions are salary sacrifice contributions considered?

Pre-tax contributions Signup and view all the answers

Which of the following is a condition for accepting contributions for a spouse aged over 69?

Contributions are always not accepted Signup and view all the answers

When was the concessional contributions cap changed to $30,000?

1 July 2017 Signup and view all the answers

Which type of contribution is considered a non-concessional contribution?

Personal after-tax contributions Signup and view all the answers

What is the taxable income for an employee with a gross salary of $90,000 after making a salary sacrifice contribution of $19,650?

$60,000 Signup and view all the answers

What is the maximum amount of non-concessional contributions that can be made in a single year?

$120,000 Signup and view all the answers

What is the tax treatment for any earnings derived from non-concessional contributions?

Taxed at super fund rate of 15% Signup and view all the answers

What is the total allowable non-concessional contribution limit if a member brings forward two years of contributions?

$360,000 Signup and view all the answers

Which of the following is NOT considered a source for non-concessional contributions?

Tax-deductible contributions Signup and view all the answers

What happens if a member reaches the maximum cap for bringing forward non-concessional contributions?

They cannot make further UDC in the following two years. Signup and view all the answers

What is the non-concessional contributions cap equivalent to?

Four times the concessional contributions cap Signup and view all the answers

What is the punitive tax treatment that applies to contributions exceeding the relevant cap?

Higher tax rate than concessional rate Signup and view all the answers

What special rule applies to employees aged over 65 regarding contributions?

Special conditions for contributions apply. Signup and view all the answers

Study Notes

Retirement Income Stream (RIS)

The proportion of retirees to workers is increasing because life expectancy is increasing.
In 2020-2022, life expectancy at birth fell 0.1 years for men and women.
Since 2012, life expectancy has increased by 1.6 years for males and 1.2 years for females.
The latest Australian statistics state that the life expectancy of a 65-year-old female is 22.8 years.
The increase in life expectancy is a major driver of the rising proportion of retirees to workers.

Superannuation Guarantee Scheme (SGS)

The SGS was introduced to improve retirement incomes and address societal and economic concerns.
The SGS mandates employer contributions to employee's superannuation accounts.
The SGS contributes to national savings and investments through super funds, which encourages economic growth.
The SGS has significantly increased national savings in Australia since its introduction.
The SGS aims to ensure a more equitable and sustainable retirement system.

Complying Superannuation Funds (CSFs)

Employers are required to make a 11.5% contribution directly from an employee's gross salary to a CSF.
Employees have some choice in choosing the type of investment fund their contributions go to, although there is a ‘MySuper’ default option.
Employees cannot access their accumulated super balance before preservation age, with some limited exceptions.
CSFs are regulated to ensure compliance with the Superannuation Industry (Supervision) Act 1993 (SISA).
The SGS has had a positive impact on Australian markets, including the Australian Securities Exchange (ASX), debt markets, and infrastructure investment.

Super Guarantee Contributions

Employees must be eligible to contribute to a super fund.
Contributions can be made by employers; personally (using after-tax money); on behalf of the spouse; or under certain (limited) employment awards or agreements.

Concessional Contributions

A fund may accept mandated employer contributions, in most cases regardless of the employee’s age or number of hours the employee works, to a maximum of $30,000 per year.
Salary sacrifice contributions are voluntary extra contributions from salary, which are subject to a 15% contributions tax.
Other accepted concessional contributions are personal super contributions, SG shortfall components, and contributions under an industrial agreement.
Concessional contributions are subject to a cap of $30,000 per year, regardless of age. Contributions over the cap are subject to punitive tax treatment

Non-Concessional Contributions

Non-concessional contributions are sourced from after-tax income and other personal sources like savings or inheritances.
A limit of $120,000 is placed on non-concessional contributions in any one year.
Non-concessional contributions can be brought forward for two years, allowing a member to contribute up to $360,000 in the current year subject to a cap of $1.66 million.
If a member brings forward UDC to the maximum, he/she is not able to make further UDC in the following two years.

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Description

This quiz covers key concepts related to retirement income streams, including the impact of increasing life expectancy on retirement dynamics. It also examines the Superannuation Guarantee Scheme in Australia and its implications for national savings and economic growth.