Most Australians will be no better off after the Federal Government's removal of benefits tax from superannuation, according to investment consultant Mercer's head of consulting for Asia- Pacific, Tony Cole.

Cole said most Australians still needed to save more and start saving earlier to increase their post-retirement income.
He added, however, that the new, simpler tax rules would encourage more people to do that.

The removal of the benefits tax was an important psychological gain, but in reality was not going to have as great a impact on retirement incomes as many had assumed, he said.

"While there are certainly no losers as a result of the new superannuation rules, there are not a lot of major winners either," Cole said while speaking at a Committee for Economic Development of Australia seminar in Melbourne this week.

He stressed it was Australia's higher earners that would see the immediate benefits of the removal of the tax on benefits.

According to Mercer's research, a person with a gross superannuation income of $60,000 would be better off by $5,250 a year, after the removal of the benefits tax, but those with superannuation incomes of $20,000 a year would see no difference at all.

"Unfortunately many people operate on the premise that they can double their superannuation contributions towards the end of their working life to make up a retirement income shortfall, but they are failing to understand the effect of compound interest and that if they contribute more early on they will fare better from the changes to superannuation," Cole said.

He added research had shown the removal of the benefits tax would cost the Government around $2.6 billion by 2009/10 - or roughly equivalent to 0.2 per cent of GDP.