The Federal Government has leapt heroically back from the verge of useful retirement system changes.

The Government has abandoned its plan to impose a $500,000 lifetime cap on after-tax super contributions made since 2007, in a concession to the right wing of the LNP that has been labelled a “cave-in to the super rich”.

Instead, the amount of income not subject to tax concessions that can go into superannuation has been cut from $180,000 to $100,000 a year.

The move has not gone down well with the Combined Pensioners and Superannuants Association.

“The Government has caved in to the super rich by abandoning the $500,000 lifetime cap on after-tax contributions since 2007. It has replaced it with a cap of $300,000 every three years to a lifetime cap of $1.6 million,” CPSA policy coordinator Paul Versteege said.

“After-tax contributions must stop once people have $1.6 million in their super, but this is virtually meaningless as only 1 per cent have that much.

“To pay for this, the Government robs the poor by abandoning the measure enabling over-65s to make after-tax contributions to their super.

“This is particularly bad news for downsizers trying to free-up capital wrapped up in their home.”

A lobby for not-for-profit super funds, Industry Super Australia, said it was a “workable compromise”.

“This measure, combined with the rest of the proposed super reforms, will help rebalance unsustainable tax breaks and redirect greater support to lower paid workers who need the most help to save for retirement,” said Industry Super Australia chief David Whiteley.

“The proposed measure will restrict superannuation being used for estate planning, while providing greater support for many more, lower income Australians saving for retirement.”