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Super Syphons Savings From Banks.

Article by WealthSafe.

Date Published: 12 Jul 2013

News item from the Financial Standard Online on 11 July 2013.

As the guaranteed superannuation contribution level rises from 9% to 12%, people will have less and less money to put away as savings with their bank, according to a new report by the Australian Centre for Financial Studies (ACFS).

This, says the report, ‘Funding Australia’s Future’, may reduce the supply of bank deposits, in turn reducing the pool of funds available to be lent. This would have a significant effect on the economy in general.

However, the authors of part two of the report, Professor Rodney Maddock and Peter Munckton said:

“The effect would however be exactly offset if superannuation funds provided deposits into the banking system on the same terms as savers did pre-superannuation” – noting, however, that “retail deposits and superannuation deposits are treated differently by the regulator.”

Banks have traditionally relied on customers leaving their savings in the bank rather than looking for more productive use of their money.

However, “professional managers will not leave lazy balances in deposit and transaction accounts and work as a force to increase the return paid on ‘deposit’ monies.

“This observation highlights the importance of contrasting how superannuation fund managers differ from other investors in how they allocate funds.”  – Written by James Fernyhough.

It’s an interesting perspective.

I do agree that people will have fewer and less savings to put away. However, a lot of that is due to the changes in the economy, and the fact that we are in a recession.

The fact is, costs of living continue to increase, wages are not increasing at the same rate, and the mining boom is in serious danger of slowing down, and some say that it already is slowing down. All this will leave less take-home pay for Australians.

The guaranteed superannuation contributions will have an impact more on employers, and the savings they put away in their businesses and personal wealth. It is basically a compulsory pay rise, and because superannuation is paid by most businesses after the end of each quarter, rather than fortnightly, often businesses are left with having to find a huge lump sum of cash to pay the quarterly superannuation payment.

As an aside, a better way to manage this is to ensure that businesses pay superannuation for employees at the same time as they pay their wages. This way, they ensure they meet their superannuation obligations each quarter, and effectively treat it as part of the wage package, which it is.

Have a chat to your accountant on the superannuation changes, and whether a self-managed super fund, or superannuation investment plan can help you save more money and save tax. Or if you’re fed up with your current accountant, and want to get serious results and start making money and saving tax and putting super aside, or getting advice on how the super changes affect you, speak to us here at Wealth Safe. Click here.

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