There were no fundamental changes to the superannuation system. 

The popular Transition to Retirement strategy has not been abolished as pre-budget speculation suggested.

Superannuation remains a vital component in funding your own retirement.

The main changes in the budget that impact retirement incomes are:

• Age pension;
• Co-contributions;
• Salary sacrifice;
• Income stream draw-down relief.

Increase to the age pension payment

An increase of $32.49 a week for the single person on the full rate of pension, which is an extra $1,690 per annum.  An increase of $10.14 per week for couples combined pension.

From 20 September 2009, single pensions rise from $304.19 pw to $336.68 pw, which is close to an 11% increase.  Couples pensions to rise from $497.36 per week to $507.50 per week, which is a 2% increase.

The annual pension for singles will rise to $17,507.36 and $25,862.72 for couples.

A recent Westpac/ASFA "Retirement Standard" survey* states that to enjoy a 'comfortable' lifestyle in retirement, singles will require $37,829 per annum and couples will require $50,651.

Increase in pension age

Increase in the Age Pension age from 65 to 67 will be implemented gradually from 2017 to 2023. 

What does this mean?

Members are not going to be eligible for aged pension until they are older. Therefore, if members are planning to rely on the age pension, they are less likely to have a 'comfortable' lifestyle in retirement.

The Age Pension alone may not provide sufficient income for a 'comfortable' retirement: this underlines the importance of funding your own retirement through personal savings, e.g. voluntary savings through your GESB super fund.

The government has also noted that they plan to align the preservation age with the increased Age Pension age.

Changes to the pension income test

To improve targeting of the pension, the pension income test will be changed.  From 20 September 2009, the taper rate (the rate at which the pension is reduced for each dollar of additional private income) has increased from 0.40c to 0.50c for each dollar above the income threshold (currently $138 a fortnight for singles and $240 a fortnight for couples). (Secure & Sustainable Pensions, May 2009, http://www.budget.gov.au/).

What does this mean?

A reduction in the taper rates may affect the amount you receive as an Age Pension. You should contact Centrelink to find out what this means for you.

Centrelink contact details

Telephone:  13 23 00
Website:  http://www.centrelink.gov.au/

Temporary reduction in Co-contribution payments

Currently, the maximum Government Co-contribution payment is $1,500. From 1 July 2009, it will be temporarily reduced to $1,000 but will increase again over time.

What does this mean?

For members receiving a maximum co-contribution, their government contribution will reduce over the next 4 years. Even though the co-contribution will be reduced, the government will continue to match contributions, meaning it is still a guaranteed 100% return.

Get your contributions in before 30 June 2009 to take advantage of the 150% Government co-contribution before it is temporarily reduced to 100%.

To find out more about co-contributions call Member Services on 13 GESB (4372), or go to http://www.gesbdoubleit.com.au/.

Salary sacrifice contribution caps to be reduced by 50%

The main change in relation to concessional contributions will be the effect on members' ability to salary sacrifice superannuation contributions to a taxed fund, such as the GESB Super scheme.

[TIP: Concessional contributions are those made to super by your employer and through salary sacrifice before tax is deducted.]

What does this mean?

For members 50 yrs or over:
The total value of your employer's contributions and your salary sacrificed contributions that are concessionally taxed has been reduced from $100k to $50k per annum. This transitional cap will only be available up to 30 June 2012.

For members under 50 yrs old:
The total value of your employer's contributions and your salary sacrificed contributions that are concessionally taxed has been reduced from $50k to $25k per annum.

While this limits the amount that most people will be able to contribute, most GESB members can still benefit from salary sacrifice strategies.

The good news is that for West State Super members these changes do not apply as it is an untaxed fund.

Further good news for untaxed fund members is that there is no reduction in the untaxed plan cap amount and the threshold of $1.1 million will still apply for the 2009/2010 financial year.

Reduction in minimum pension draw-down payments

The minimum draw-down relief for people in Retirement Income Products (Allocated Pension and Transition to Retirement Pension members) has been extended for the 2009/10 financial year.

People with retirement income can reduce the minimum draw-down amount; providing relief for retirees who do not want to draw down more than necessary in the current economic climate.

What does this mean?

Retirees can leave the majority of their retirement savings invested while the market recovers. This is an excellent opportunity for people to revisit their financial strategy.

GESB Financial Advice can offer you a personalised and comprehensive service to help you get your finances on track. To find out more, visit the GESB Financial Advice section of the website, call us on 13 GESB (4372) or we can call you. 

* Westpac/ ASFA, December 2008
Other sources: Secure and Sustainable Pensions, http://www.budget.gov.au/