Retirement Income Streams and Superannuation

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.

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.