DBFO reforms to save retirees lacking advice on super taxes

New research from the Super Members Council (SMC) has uncovered yet another area where the proposed reforms under the government’s Delivering Better Financial Outcomes (DBFO) package are necessary, this time to save hundreds of thousands of retirees paying more tax on their superannuation than required.

According to the consumer survey, 700,000 Australians over the age of 65 and not working full-time still have their super in an accumulation account, accounting for approximately $90 billion, and are paying on average an extra $650 per year in taxes.

The research also indicated that keeping $100,000 in an accumulation account instead of moving it to a tax-free pension account could cost them up to $4,500 extra in super taxes across their retirement; for those with balances of $200,000, this increases up to $9,000.

The survey also revealed that 39 per cent of retirees with savings balances under $100,000 said they kept the funds in accumulation accounts because they didn’t know what to do with it or how; 19 per cent also said they haven’t yet decided what to do with their super.

Super Members Council CEO, Misha Schubert, said providing basic advice to members on when the best-suited time could be to switch accounts could save retirees from over-paying taxes and help them make more informed financial decisions, as proposed in the DBFO package.

“Not knowing enough about super can lead to poor decisions, like leaving accounts inactive or withdrawing funds without proper planning.”

“Making simple information and advice available to more Australians is a big missing piece of the retirement puzzle. The coming financial advice reforms will help make advice more affordable.”

“The package of reforms will enable the 2.5 million Australians on the runway to retirement to get the high-quality information they need to plan wisely at a much lower cost – and we urge Government to introduce legislation swiftly.”

Schubert also said only 26 per cent of current retirees have engaged their super fund to provide financial advice, at the same time as research shows 80 per cent of Australians aged between 45 and 54 years need financial advice but are unable to afford it.