“We’re living longer than we expected back when the system was designed 30 years ago. And we’ve also got lots and lots of more people working in insecure work. So it’s even more important than ever that people get the maximum possible superannuation contribution so that they can have a decent retirement,” she says.
However, the government’s pending inquiry into the superannuation system and continued debate over the rise has cast some doubt over whether the higher target will be achieved.
Yet there remain plenty of benefits to topping up balances early without waiting to see how the super guarantee eventually resolves.
Scheerlinck suggests workers who have spare financial capacity make additional contributions to their super.
Workers can make tax concessional contributions of up to $25,000 a year via salary sacrifice or through BPAY if they claim a tax deduction afterwards. They can also make after-tax contributions of up to $100,000 a year from their take-home pay.
The more they contribute and the earlier they do so, the more they will benefit from compound interest.
Where a spouse has a low income or has taken time off for caring responsibilities, the higher paid or working spouse can make contributions on their behalf and claim a tax offset for doing so, she says.
Analysis by Industry Super Australia shows if the super guarantee moved to 12 per cent, a 30-year-old-male earning $85,000 a year would stand to gain $147,000 from their super by the time they reach retirement compared with if the super guarantee was frozen at 9.5 per cent. Separately, a 30-year-old woman earning $85,000 a year, who takes time to have children could gain up to $93,000.
For a local family together, they could gain $240,000, the analysis shows.’
In fact, the current freeze in the super guarantee rate is already proving expensive for wage earners. Industry Super says the delay in rising the guarantee has already cost Australian workers a total of $38 billion.
Industry Super Australia CEO Bernie Dean points out that while it’s all very well to talk about smaller nest eggs, the idea behind superannuation is to fund a retirement lifestyle. There are many strategies workers can adopt that are a good idea regardless of the super guarantee debate.
Dean outlines some basic steps people should undertake before they start considering account top ups or salary sacrificing.
He says super account holders should make sure they don’t have multiple accounts, which can be a common problem for people who have changed employers. They should consolidate all their accounts into the single account they are currently using because it will save money and thus help their balance grow more quickly. “You’re only paying one set of fees and it’s going to be much easier to keep track of. That’s a basic thing you can do,” he says.
He also advises people to check how much insurance cover their superannuation fund provides, whether that cover is adequate for their needs, and the fees they are paying.
Workers should also check that the amount of superannuation contributions that is shown on their payslips actually appears in their super account. Dean says it can be a common problem that employers don’t pay workers’ full superannuation entitlements, particularly for those workers in casual employment.
“By doing those three things, you’re going to be significantly ahead in saving for your retirement,” Dean says.
CareSuper was established in 1986 to look after super for professionally-minded people. Today, we’re the largest Industry SuperFund for savvy professionals from all walks of life but small enough to know your name. We help members reach their financial goals through smart, proactive investing and competitive fees. The result? Consistent, long-term returns for members – and a list of awards to match.
To find out more about CareSuper, visit caresuper.com.au.
The information provided in this article is general advice only and has been prepared without taking into account your particular financial needs, circumstances or objectives. You should consider your own investment objectives, financial situation and needs and read the appropriate product disclosure statement before making an investment decision. You may also wish to consult a licensed financial adviser.
CARE Super Pty Ltd (Trustee) ABN 91 006 670 060 AFSL 235226 CARE Super (Fund) ABN 98 172 275 725