The accounting firm has suggested that the capping of superannuation contributions be reviewed and that research be undertaken into the effects of the caps on superannuation income stream adequacy for the current population of workers.

BDO said in the submission that the government could consider the replacement of annual contribution caps with a lifetime contribution cap to provide for workers who can only afford to make additional contributions later in their working life.

It noted that while many taxpayers save for their retirement progressively during the years that they are earning income, it is simply not affordable for the vast majority of the taxpaying community to do so.

“With the costs of rent and mortgages, raising and educating children taking almost all or most of their funds during their early and middle income producing years, most of them do not have the extra funds to put into retirement savings until towards the end of their working lives,” it noted.

“Over the last 10 years, the concessional superannuation contribution cap for older workers has reduced by three quarters from $100,000 per annum to $25,000 per annum.”

The submission noted the previous government’s Retirement Income Review indicated there are a small number of retirees that were able to build up substantial balances in their superannuation accounts during the previous years when there were no or substantially higher contribution caps.

“There is a perception that the reduction of the contribution caps is in some way rectifying this anomaly. However, the cutting of the contribution caps to such low levels now does nothing to mitigate the possible policy defects that allowed the small number of retires to take inappropriate advantage of the superannuation system in the past,” the submission stated.

BDO said that the level at which the contribution cap is currently set should be reviewed in light of evidence on the adequacy of such savings for a range of scenarios.

“Such a review should have regard to the effect of capping on the current population of workers and not based on the people who have obtained a distortional advantage out of the superannuation regime because of the previous more concessional rules,” it said.

“BDO suggests the best alternative would be to replace the annual contribution cap rules with lifetime concessional contribution cap including appropriate transitional arrangements. The lifetime cap number should be meaningful to allow a person and their family to be self-sufficient in retirement.”