While concessional contribution limits have been reduced, if you’re over 50 you still have the opportunity to take advantage of the higher $50,000 limit until 30 June 2012. Taking advantage of the higher limit while it is here could increase the power of your super savings.

Let’s look at the example of Robert and Jane. Robert makes sure the total concessional contribution to his super is $50,000 for each of the three years to 30 June 2012, while Jane contributes $25,000 per year for six years. At the end of the six year period Robert has accumulated $148,000 from his original 3 years of saving together with investment earnings while Jane has $142,000 even though she contributed exactly the same total amount. That’s a difference of $6,000, even if Robert makes no contributions at all in the last three years.

As the case of Robert and Jane shows, taking advantage of the more generous contribution limit currently available can be a great way to pump up your super savings, and reduce the impact of needing to comply with a lower limit in future years.

MKT/2185/0809

¹ For ease of illustration and to show figures which are in “today’s dollars”, inflation has been assumed to be nil (including assuming that the contribution limit will be a constant $50,000. The limit will actually be indexed to Average Weekly Ordinary Time Earnings in increments of $5,000 over time).

² A constant ‘real’ investment return. (ie investment return above inflation) of 3% pa has been assumed.  Actual investment returns can fluctuate significantly from year to year and the degree of variability in returns will affect the outcome of these scenarios.

³ The contributions are assumed to be “concessional” contributions ie employer or salary sacrifice and contributions tax of 15% has been deducted.