As politicians on their cosy defined benefits retirement structure now dictate to the rest of us what superannuation benefits we receive, we are now at the political mercy of people with only their interests at heart.

The purpose of superannuation in Australia is fairly simple, our employer pays 9.5% of our gross income into a retirement account to provide future income for our retirement. This system was based on foregoing current pay rises for future benefits. What we need to remember is, this amount was based on 40 hours per week and not the 60 to 80 hours I was previously working. Financially I would have been better off receiving immediate pay rises over the period and investing the funds myself.

There needs to be tax incentives for people to save future income for an event a long way into the future. The plan was to make the investment attractive so more people would top up their accounts and remove the social security burden from future generations. Instead, there are now caps and so many provisions, many are unsure of what to do. Superannuation only benefits those who will retire at age 60, if you have too many assets then you do not qualify for the government pension regardless of how much tax you paid in your working life.

Likewise, a person who has paid no net tax their whole working life is able to draw a government pension at age 67 regardless. So a reasonable person would conclude that there is no incentive to save for retirement, instead enjoying that money throughout their working life and drawing a government pension on retirement.

The other strategy is saving for retirement and retiring at age 60, they draw their self-funded retirement accounts down for the first 7 to ten years and draw either a full or partial pension from the government. There are other issues too, a pensioner enjoys financial rebates and cost of living allowances that a self-funded retiree doesn’t. So, if you are self-funded, retire early and enjoy the early years of retirement drawing down your account while you are fit and active enough to enjoy fully.