Cost of living stops Aussies from topping up super


Australians are stacking up serious savings in super, but as our reader survey shows, there are aspects of super that still have us baffled.

You could have more in super than you realise.

One of the nation's biggest funds - Australian Retirement Trust, says the average balance across its 2.3 million-plus members is $123,000.

cost of living crisis stops aussies from contributing to super

But for people in their mid-60s the average jumps to around $428,000.

The fact is, our retirement honeypot is looking pretty sweet.

Better still, a recent Money reader survey shows plenty of us are taking an interest in our super.

A whopping 65% of respondents have used a retirement calculator. Makes sense, after all who doesn't want a crystal ball into their retirement lifestyle?

However, there are areas where our collective super report card reads 'must do better'.

Two in three happy with their fund

On the upside, the vast majority of people (66%) say they're happy with their super fund.

But maybe we're just accepting whatever we have.

One in six (15.1%) people don't know how to compare funds, and a similar proportion (15.3%) point to information overload saying there are too many options to consider.

One in five clueless about how their super is invested

While four out of five (80%) survey respondents know how their super is invested, that still leaves one in five in the dark about their nest egg's investment strategy.

This matters because the way our super is invested shapes annual returns. And, as an ultra-long term investment, super really packs a punch for compounding.

Think of it this way. Let's say an 18-year-old starting in the workforce on a wage of $30,000 chooses a capital stable option for their super, with returns averaging 4.6% annually.

At that rate, by age 67 our worker's super could be worth around $162,500.

If the same worker selects a growth investment strategy for their super, the returns are likely to average 8.5% annually. This would see their super savings skyrocket to about $481,500 by age 67 - a difference of $319,000.

The takeout is simple. Know how your super is invested. It can make a massive difference to the quality of your retirement.

Confusion around insurance

Only two in five (41%) respondents are confident they have life cover through super. Yet 46% say they have Total and Permanent Disability (TPD) cover.

In fact, life insurance and TPD cover tend to go hand-in-hand as automatic inclusions of super.

If you have a MySuper account, the fund must, by law, provide life and TPD cover.

Bottom line, check with your fund if insurance is in place. Chances are you're covered though it may only be a basic level of protection.

Cost of living crunch squeezes contributions

Most Australians are happy to let their employer do the heavy lifting growing super savings.

Federal Treasury figures show personal contributions peak when we're in our early 60s just ahead of retirement. Even then, fewer than one in four people add to super from their own pocket, a figure that drops to less than one in ten among the under-40s.

So, what's holding us back?

Almost two in five (37%) people point to cost of living pressures. However, as the graph below shows, one in four (24.7%) admit there is nothing preventing them contributing more to their super.

what is stopping you from contributing more money to super

Confusion over MySuper

One of the big surprises of our survey is the level of misunderstanding around MySuper accounts.

Less than two in five (37%) people know what a MySuper account is, and while 15% have heard of MySuper, almost half (48%) admit to being clueless about these accounts.

Respondents' comments highlighted a variety of misconceptions.

Some think MySuper has higher fees. Others believe it's a name for industry funds. One respondent described MySuper as a place to "look for lost super".

The rub is that plenty of these respondents are likely to have a MySuper account.

Across the 24 million super accounts held by Australians, close to 15 million - more than half - are MySuper.

As a quick recap, MySuper is a simple, low fee option chiefly pitched at workers who haven't nominated their preferred super fund.

If you don't name a preferred fund when you start a job, and don't already have an existing super account, the boss can pay your super contributions into the default MySuper fund of their choosing .

It all comes down to having a quick check of your super.

If it turns out you have a MySuper account, rest assured you're likely getting good value. If you want more than the basics, most of us are free to select the fund of our choice.

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A former Chartered Accountant, Nicola Field has been a regular contributor to Money for 20 years, and writes on personal finance issues for some of Australia's largest financial institutions. She is the author of Investing in Your Child's Future and Baby or Bust, and has collaborated with Paul Clitheroe on a variety of projects including radio scripts, newspaper columns, and several books.