Here at Qantas Super, there’s nothing we love talking about more than superannuation – but even we can acknowledge that’s not exactly the case for most Australians.
In fact, a recent survey of over 2000 Australians conducted on behalf of the Association of Superannuation Funds of Australia (ASFA) found superannuation is near the bottom of the list of the average person’s every day concerns – but as it turns out, that’s not because people don’t care about their super.
Rather, the survey found the majority of Australians share a number of core beliefs about the importance of the super system and its effectiveness:
Super is important for a comfortable retirement
We must maintain the schedule to the 12 percent Superannuation Guarantee (SG)
With the Superannuation Guarantee (the minimum amount that your employer must contribute to your super on your behalf) set to increase by 0.5 percent each 1 July until it reaches 12 percent in 2025, the survey found more than 70 percent of respondents agree the increase will help people save more and avoid being forced into poverty in retirement.
Three quarters of respondents also agreed that postponing any increases may mean many people will have to work longer to retire.
So, just how much will the increase to 12 percent add to your balance over time?
According to projections from ASFA, a 30 year old with a starting balance of $40,000, earning average career wages, could expect to have an extra $85,000 in their super when they retire at 67 was a result of the SG increasing to 12 percent*.
Let’s look at what their balance at retirement would be if the Superannuation Guarantee:
- Remains at 9.5%: $449,000
- Rises to 10% and stays at 10%: $468,000
- Rises to 12%: $534,000
You can calculate the impact of the increases on your balance with our retirement income simulator.
*Source: ASFA Economic Snapshot 2 July 2021. Projections for illustrative purpose only. In reality, a worker will not earn average wages throughout his/her career.
Parts of super are complicated to understand
The survey found that the majority of respondents understand how super works, with 63 percent stating they somewhat or strongly agree with the sentiment.
However, there’s still work to be done in making aspects of super simpler, with 55 percent agreeing that super is overly complicated. In particular, the way that fees and returns are calculated and presented to members were identified as an area for improvement.
If you want to get to grips with the ins and outs of super, we’re here to help. If you’d like to learn in your own time, we have a range of explainers on our website to get you up to speed on the basics of super. You can also attend one of our webinars on a range of topics.
Alternatively, if you learn better by having a chat, you can book a one-on-one appointment with a friendly member of our Super Advice team at any time.
Three key questions about super
A focus group conducted as an extension of the survey found that most people tend to think about their super in terms of three broad key questions:
- Am I saving enough for a comfortable life in retirement?
- Is my super fund performing well enough to deliver good returns?
- Will my super balance continue to be secure and protected?
If any of those questions sound familiar, don’t worry – we’ve got the answers.
Am I saving enough for a comfortable life in retirement?
There’s no one magic number that your super balance needs to hit before you retire; as you’ll often hear when it comes to your finances, it all depends on your personal needs and circumstances.
However, there are a couple of benchmarks that can help you get a rough idea of how much you may need to enjoy a comfortable retirement.
As a guide, ASFA’s Retirement Standard estimates that a couple will need a lump sum of $640,000 in combined super savings at retirement in order to enjoy a ‘comfortable’ retirement. A single person, meanwhile, will need a lump sum of $545,000 in super savings. A ‘modest’ lifestyle, on the other hand, will require a lump sum of $70,000 in super savings at retirement – according to ASFA, this figure is relatively low due to the fact that the base rate of the Age Pension (plus various pension supplements) is sufficient to meet much of the expenditure required at this budget level.
However, it’s important to note that the Retirement Standard won’t cater for everyone. For example, it assumes, for both a modest and comfortable lifestyle, that retirees own their own home outright and are relatively healthy. It also assumes that the retiree, or retirees, will draw down all their capital and eventually receive a part Age Pension.
ASIC’s MoneySmart has also calculated a benchmark figure for how much you might need. MoneySmart tells us to assume you need 67%, or two-thirds, of your pre-retirement income before you retire in order to maintain the same standard of living in retirement.
However, this doesn’t cater for everyone either, with MoneySmart pointing out this estimate is only suitable for above average income earners.
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