Young Australians tend to have more money in their superannuation accounts than their bank balances, yet 40 per cent of them have no idea what their super balance is and a further 16 per cent only have a vague idea.
Research by the Association of Superannuation Funds of Australia (ASFA) reveals more than half of young people aged under 29 years strongly support super as a good way to save for retirement, yet many significantly underestimate the amount of money they will need to retire.
Young people expect on average they will need $625,000 while those aged 60 years and over staring down retirement expect on average that they will need nearly $1 million.
Young people are also failing to consolidate multiple super accounts and therefore risk eroding their super balances unnecessarily by paying multiple fees and charges.
More than 30 per cent of young people aged 18–25 have more than one super account and 10 per cent of them have three or more accounts. For those aged 26–30 years, nearly 20 per cent have three or more accounts.
ASFA found more than 60 per cent of young Australians have multiple super accounts due to lethargy in consolidating them and 30 per cent report trouble in finding old accounts, despite ready online access available via MyGov.
ASFA CEO Dr Martin Fahy said while the commonly held view is that young people are disinterested in or disengaged from their super, six per cent of Australians aged under 29 are checking their super balance daily.
It’s a habit the super industry is keen to foster to help young people set themselves up for retirement.
Dr Fahy today launched a competition for Youth Week 2017 (31 March – 9 April) designed to get young people to think about the benefits of delayed gratification and increased long-term wealth via superannuation.
Young people aged 15–25 years are encouraged to submit entries to win either $300 cash upfront or $1,000 for their active super account by explaining which prize they prefer and why. Entries can be written or in video format and should be sent to YouthWeek@superannuation.asn.au by 5pm Friday 14 April 2017. The winner will be announced by the end of April.
“We hope this competition encourages young Australians to consider the long-term benefits of super and the magic of compound interest,” Dr Fahy said.
“Super is a long term investment and a key part of everyone’s employment conditions. Although many young people may see super as a distant prospect, we are keen to experiment with some behavioural economics to get them thinking about super in a different light.
For a young Australian, $1,000 invested in a super account will deliver at retirement on average $4,000 in today’s dollars.
ASFA found around a quarter of Australians aged 15–19 had a super account as did around 75 per cent of those aged 20–24. Average balances are not that large but are substantial relative to what most people had in their bank account.
According to the latest available data from the Australian Bureau of Statistics, the average super balance in 2014 for those aged 20–24 was around $5,000 rising to more than $16,000 for those aged 25–29 years.
Young people and super facts
Many young people will have a super balance. If you have a full time, part-time or even casual job and you earn more than $450 in a calendar month your employer is required to make super contributions to a fund on your behalf at the rate of 9.5 per cent of your wages. If you are aged less than 18, super contributions are only payable if you work more than 30 hours per week.
If you are employed, check your payslip and your superannuation account transaction records to make sure you are getting the contributions you are legally entitled to. If you are not, the first thing you can do is take it up with your employer. The Australian Taxation Office (ATO) can also help you with information and advice on your super entitlements and recovering any contributions your employer has not paid.
Multiple accounts can cost you dearly over time. Each account will typically have a fixed administration charge of at least $100 a year. The more accounts you have, the more administration fees you will pay. As well, with each account there could be associated insurance cover, with deduction of premiums of $200 or more per account.
While insurance coverage can be beneficial you should check to see you have the cover you want or need, particularly if you have more than one account. More than 25 per cent of people aged under 29 report they are not sure whether they have insurance cover, let alone knowing anything about its details.
Consolidating super accounts is not hard. All you have to do is log into your MyGov account and go to the ATO section to view the superannuation accounts you hold. Consolidating your super into just one account is only a few clicks away once you have mastered your MyGov login.
For further information, please contact:
Teresa Mullan, Media Manager, 0451 949 300.
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral and non-party political, national organisation. ASFA’s mission is to continuously improve the superannuation system so people can live in retirement with increasing prosperity. We focus on the issues that affect the entire superannuation system and represent more than 90 per cent of the 14.8 million Australians with superannuation.