Superannuation contributions surged in the final months of 2016, suggesting investors are moving early to boost their savings ahead of reforms that will take effect in July, says Colonial First State’s Peter Chun.
Voluntary contributions to Colonial’s FirstChoice super rose sharply in November, up 25% compared with October and up almost 20% compared with the previous November.
Overall, contributions to FirstChoice in November and December rose more than 35% compared with September and October.
Changes from July 1 will affect the amounts allowed for certain types of contributions and may also impact the tax treatment of those contributions.
Changes to the non-concessional contribution rules include a reduced annual cap, from $180,000 to $100,000, for people with a total balance of less than $1.6 million.
Those with a balance of $1.6 million or more on June 30, 2017, will no longer be able to make non-concessional contributions in the 2017-18 financial year. For them, the 2016-17 financial year could be their last opportunity to make post-tax contributions.
Chun, general manager of product and investments, says the rise in voluntary contributions also coincides with the passing of the federal government’s super reforms into legislation, providing consumers and their advisers with certainty.
“These are the largest changes to Australia’s super system in almost a decade and this spike in voluntary contributions reflects not only more confidence in the system but a sentiment to act early and take advantage of this window before the new rules take effect,” he says. “We expect to see further increases in contributions as the June 2017 deadline approaches.”
The coming months would be particularly important for those approaching retirement or for people who have taken time out of the workforce, he says.
“The reduction in non-concessional contribution caps will have a major impact, making this next period an extremely valuable opportunity for people to increase their super before the June cut-off.”