A number of critical factors have combined to ensure that Aussies can no longer turn a blind eye to how they’ll fund their retirement; population growth putting pressure on the Government Age Pension, the increased cost of living and longer life expectancy mean that alternative income sources need to be planned to achieve a comfortable retirement.
The end result? Australians are starting to engage with their super earlier – and they are asking for assistance from their employer to do so.
So how do you get your employees interested in their super?
When talking to employees about their super, ask them what sort of retirement they want and encourage them to seek advice on what they could be doing now to make that happen. It may be far into the future, but a little thought now could make a big difference when they retire. The simple truth is the earlier they add to their super where they can, the bigger the impact it may have on their super balance.
It’s worth reminding them that it’s never too early to consult a financial adviser and it’s possible to access some basic information at no cost through most default funds.
Another important tip is to remind them to review their insurance options. Most super funds include death, total and permanent disability and income protection insurance as a default for members. You can tell employees what their default cover is, but you can’t advise them on increasing or decreasing it. Basic insurance cover as part of a super account may be enough to protect both the employee and their family – but it’s important that they consider if they have enough insurance to meet their needs.
Here are some other areas you can mention:
• Consider simple strategies that can make a difference such as consolidating super accounts, or making additional deposits.
• Seek advice on salary sacrificing and making payments to a spouse’s account
• Provide your tax file number to your super fund and avoid paying up to 49% tax on before-tax contributions.
• Look into your eligibility for government co-contributions to boost your super balance.
• Also, check with the ATO about lost super – some people might be pleasantly surprised to find they have a super account they’ve forgotten about.
It’s also worth considering how core messages about super can be tailored to connect more effectively with the demographics of the workforce.
For example, younger employees are likely to be feeling the pressure of high housing costs, HECS fees, etc. They may have other goals to achieve before considering paying extra into their super, such as travel. However, educating them about the importance of super early can have a sizeable effect on their super savings – and thus their retirement – down the track.
For mature-age workers, it’s important to provide support and education about their super and retirement. Employers can arrange seminars or education sessions on topics such as salary sacrifi ce, transition to retirement (TTR), or setting up retirement incomes – AustralianSuper runs such sessions for many businesses.
Assistance for female employees
While there has been plenty of public and media debate about gender pay inequality, less has been said about the inequalities that exist in super savings. The Association of Superannuation Funds of Australia (ASFA) reports that women retire, on average, with $138,150 in super savings – $154,350 less than men.*
Around 90% of women will retire with inadequate savings to fund a comfortable lifestyle in retirement, and even more alarmingly, one in three women will retire with no superannuation at all.
Georgina Williams, AustralianSuper’s Group Executive, Engagement, Advocacy & Brand, acknowledges that saving a decent super balance is harder for women due to their roles as carers and parents, plus the lower rates of pay women tend to receive.
“But they shouldn’t panic,” she says. “They should take action.”
Some of the steps she suggests women take are:
1. Check that all your super is in one place. “If you have had several different jobs, you might have accumulated a few different super accounts – and be paying fees on each one,” says Williams. It should be easy to move all your money into one fund via a form on your super fund’s website. “That simple move can save thousands of dollars in the long term.”
2. Make sure you are paying the lowest fee possible. “Industry funds like AustralianSuper don’t make a profit for shareholders – so our fees are low by industry standards, and any profit goes straight back to members,” says Williams.
3. If you’re still working, find out if you qualify for the government’s Low Income Super Contribution or the renamed Low Income Super Tax Offset of up to $500 a year.
4. And finally, top up while you can. “If you can find even a few dollars each month to put into super, it could be really worthwhile. As little as $50 extra a month in your 20s can add more than $175,000 to your super balance by the time you retire,” says Williams.
Industry super funds
Industry super funds have upped their game in recent years to keep up with the needs of Australian workers.
Combined with their low fees, strong long-term investment returns and ability to provide good-value insurance, industry funds now provide a range of financial advice options, education and online tools to help members. Plus they have a range of employer benefits such as straightforward admin and ongoing support.
For HR professionals struggling to provide competitive benefits and employee offerings in a tight talent market, being able to demonstrate you care about your employees now as well as into their future is vital.
*ASFA report on Superannuation account balances by age and gender, December 2015
As Australia’s largest super fund, we’ve built our services around everyday Australians – and their businesses. In fact, we work with more than 235,000 businesses across almost every industry, with local experts in all states and territories. Find out how making AustralianSuper your default fund could be the right choice for you and your employees. Call 1300 697 873.
This article was prepared in July 2016 and is sponsored by AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788 Trustee of AustralianSuper ABN 65 714 394 898. It may contain general financial advice which does not take into account your personal objectives, situation or needs. The views expressed in this article include those of HRD and AustralianSuper. HRD made their comments based on their experience and expertise. Before making a decision about AustralianSuper, consider your financial requirements and read the Product Disclosure Statement, available at www.australiansuper.com/pds or by calling 1300 300 273. Investment returns are not guaranteed and past performance is not a reliable indicator of future returns. Consider your debt levels before adding to super.
THE DAYS of ‘set and forget’ when it comes to Australians and their superannuation are fast becoming a thing of the past. Today, most working Australians are well aware that super is part of their salary package and could possibly be their second most valuable asset when they retire.