Young people 'locked out' of super
A "discriminatory legal relic" that prevents young Aussies from receiving superannuation contributions should be overturned, according to Industry Super Australia (ISA).
ISA says about 375,000 young workers aren't entitled to compulsory super contributions unless they work over 30 hours weekly with the same employer. This prevents an estimated $330 million annually from being contributed to the superannuation accounts of people under the age of 18.
ISA chief executive Bernie Dean says: "This is an out-of-date law that discriminates against our youngest workers just as they're starting out - it's unfair and the law needs to be modernised."
"Locking thousands of teen workers out of our world-class retirement savings system is not giving them the super start to work they deserve. How can we explain that young workers don't get super while an older colleague doing the same job does?"
A UMR survey of 1075 people found near universal support for the payment of super for all workers - with 85% of respondents agreeing with the principle that super should be paid to all workers.
Yet, most workers under the age of 18 are denied superannuation contributions, as over 90% of teenagers typically work less than the 30-hour weekly threshold required to receive superannuation entitlements. Still, paid employment is a consistent part of life for most teenage workers, with 75% of under-18s employed for six to 12 months each year.
This early career discrimination not only financially impacts young workers but also imposes an administrative burden on employers who are required to monitor the working hours of those under 18. This becomes particularly challenging given the highly casual nature of the workforce and when employers pay super quarterly, ISA says.
Removing the current legislative threshold could result in young workers receiving an additional $885 each annually in superannuation contributions. If these contributions were made available to young workers, decades of compound interest would see this amount increase to $10,200 by their retirement, ISA modelled. It would also promote engagement with the super system at an earlier age.
"Removing the 30-hour threshold wouldn't just be fair for young workers, it would be good for the employers who have to face the administrative nightmare of keeping track of the weekly hours of a highly casual workforce," Dean says.
When the superannuation system was established in 1992, under 18s were negotiated into the legislation because it was feared fees and insurance would erode smaller super balances. However, fees for lower account balances are capped and insurance isn't automatically offered to super members under the age of 25 with balances less than $6000.
This article first appeared on Financial Standard
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