POWERED BY MOMENTUM MEDIA
Asset-based dividend method would lift retirement income
The former chair of the Commonwealth Superannuation Schemes, Peter Reynolds, has called for the government to adopt an asset-based dividend method to enhance all retirement balances and government revenue.
In a submission to the Retirement Income Review, Reynolds said upfront tax on super was crippling retirement income.
“The upfront tax limits the potential of the super scheme by reducing the superannuation guarantee (SG) to 8% of ordinary time earnings before investment (e.g. a $10,000 SG is reduced to $8,500). This configuration of taxes reduces the return to individuals and government,” he said.
Reynolds said a more effective system would be an annual asset-based fee or dividend of 1.25% on the super pool of funds in accumulation mode.
“This approach redistributes the tax burden from the earlier years of accumulation to the latter years. In so doing, it enables greater wealth to be created for all participants with the greatest benefit flowing to low income earners and those with low balances,” he said.
“The dividend method would increase and stabilise government revenue with a predictable compound growth rate of 7% per annum for the next 15 years.”
Reynolds noted it would also simplify the super scheme with government revenue requiring only one calculation per annum on the mandated 30 June balance of each super account.
Source: Peter Reynolds
The figures are based on an estimated current tax revenue of $30 billion. A dividend of 1.25% from an asset base of $2.4 trillion (accumulation mode) would yield the same amount.
Recommended for you
The super fund announced that Gregory has been appointed to its executive leadership team, taking on the fresh role of chief advice officer.
The deputy governor has warned that, as super funds’ overseas assets grow and liquidity risks rise, they will need to expand their FX hedge books to manage currency exposure effectively.
Super funds have built on early financial year momentum, as growth funds deliver strong results driven by equities and resilient bonds.
The super fund has announced that Mark Rider will step down from his position of chief investment officer (CIO) after deciding to “semi-retire” from full-time work.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
76.97 3 y p.a(%)
2
Global X 21Shares Bitcoin ETF
76.46 3 y p.a(%)
3
UBS Solactive Global Pure Gold Miners UCITS ETF Dis USD
51.13 3 y p.a(%)
4
Global X GlobalX FANG+ ETF
45.15 3 y p.a(%)
5
Select Baker steel Gold Institutional
43.78 3 y p.a(%)
Pardon my ignorance; more information please. Is it a Fee or Dividend …… and, there is still only 100 cents in the dollar. Very confusing.