Your Super Your Future
By Chris Gazenbeek
How much super do you have in your account and how much super do you need when you retire? Hey, but wait a minute; I’m only 30, I’m still renting and super is the last thing on my mind.
The truth is 30 quickly becomes 40 and not before too long, 40 becomes 50. Not long after that, people do their sums and quickly realise that they won’t have enough in their super account so they can retire with dignity.
Help! How much super do I need?
The amount of super you need to live comfortably in retirement depends on a range of factors including your cost of living, outstanding debts you have including a home loan, and whether or not you have other income streams such as dividends and/or interest returns on savings.
According to the Association of Superannuation Funds of Australia, singles retiring today aged 66 will need retirement savings of $545,000 whilst couples will need combined retirement savings of $640,000.
Superannuation is core business for the SDA
It is a sad fact that 45 years ago there were no industry superannuation funds such as REST. Some retailers had their own funds and invariably, management were the only employees who were invited to participate in the fund.
The leaders of the SDA at that time and the ACTU realised that things had to change. Living solely on the age pension could not deliver a dignified retirement for most workers. The creative minds of the SDA and the ACTU realised that employer-funded universal occupation superannuation could provide part of the answer to a dignified retirement. After much lobbying, the superannuation guarantee levy was introduced and passed into the federal parliament. It is fair to say that this super levy has been one of the greatest achievements of Australia’s trade union movement. It is a far cry from the old days where most SDA members had to fund their own retirement. For most members, this was very difficult.
It is a fact of history that the initial legislated amount was 3% and today it is 9.5%. But, is it enough? We know that Australians on modest incomes or who have casual or seasonal work patterns will find it nearly impossible to save enough money to meet the $545,000 and $640,000 targets.
The difference between the average super balance and what is recommended can be reduced in many ways. Firstly, the gap can be decreased through our increases to the superannuation guarantee levy. Currently, under Australia’s Superannuation Laws, employers are required to pay 9.5% on top of your wages into super. However, this will still leave retirees too reliant on the age pension. Consequently, the federal parliament has passed legislation that requires a gradual increase of the super percentage from 9.5% to 12% by 2025.
Recent research shows that the super guarantee levy saved the 20/21 federal budget by $17 billion. This figure is expected to rise to $100 billion by 2058 once the planned super increases go ahead as planned. Super combined with a means-tested pension is the most efficient way for governments to reduce the burdens on the taxpayer. It also ensures that SDA members can have a decent retirement income.
Secondly, consolidating accounts can have a big impact on your retirement balance largely due to removing the accumulated impact of paying two or more sets of fees and potentially two or more sets of insurance premiums. The combined effect of increasing super to 12% by 2025 and consolidating accounts for those under 30 or earning less that $40,000 is profound. It could mean an additional $60,000 in retirement.
There are also other ways to increase super such as splitting super more evenly between partners, making additional payments, and getting co-contributions from government for those who qualify.
Occupational superannuation should be also paid to everyone including those under 18 years old, those on parental leave and those who are earning less than $450 per calendar month. By creating an equal system for all workers including SDA members, we can ensure the super system boosts national savings and improves Australians’ standard of living in retirement.
At Rest Industry Super, the superannuation fund for those working in our industries, the focus is on low fees, long-term performance, and profits returning to members. The fees have recently changed and Rest Industry Super continues to keep fees low. Details about that can be found on the Rest Industry Super website. They should be analysed by looking at a combination of low fees and of course, your personal circumstances.
It is also good to see that Rest Super continues to give strong performance and continues to deliver on its investment objective. In fact, with all the gyrations in the global financial markets, it is pleasing to note that Rest has delivered average returns in excess of 7.5% over the last 10 years.
My best advice I can give to all SDA members is to become Superannuation savvy. Go to the REST website. Learn about where your funds are invested. See if you have too much, for example, income protection insurance or not enough. Learn about salary sacrificing. Learn about the federal government co-contribution. Learn about combining your funds so you can save on your fees.
(Thankfully, this is a very easy process). Learn about the different super options from the most passive option to the most aggressive option. Learn, learn, learn.
Finally, always remember that information is power. Learning and knowing more about your own personal superannuation can only mean you will have a far better chance to have a healthier superannuation balance when you retire.