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Personal Finance Information |
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Introduction to Australian Superannuation
Australians, in general, constitute some of the worst savers in the world. Current estimates suggest that, on average, Australians save just 4% of their income. This is less than half of the 11% estimate for Australians in the late 1970s. In the past, pensions from taxpayers were used to provide pensions for senior citizens upon their retirement. However, because of the increased life expectancy of Australians coupled with the decrease in the average number of children per household, the use of pensions, if persisted with, will put a significant strain on the Federal Budget. As a result, the concept of superannuation was introduced whereby employers are obligated via the superannuation guarantee to contribute at least 9% of an employee's wage to a superannuation fund which must be preserved until the employee has reached retirement before it can be accessed. The advantage of making contributions to superannuation are that it introduces a form of forced savings for Australians into a fund which will hopefully invest the money into the appropriate assets for increasing its value over the long term. As an added incentive, contributions to superannuation are only taxed at a marginal rate of just 15%. For most income earners in Australia, this will be more attractive than the usually high tax rate that they would be subjected to if their money was not put into superannuation. A disadvantage of the superannuation scheme is that many Australians, particularly those who change employers regularly, are likely to have various small amounts of money in a number of separate superannuation funds. This, in turn, can lead to a decrease in earnings as each fund will introduce any number of fees for maintaining the account. More significantly, a member account in a superannuation fund can possibly be forgotten in time and become unclaimed. It is estimated that there is currently more than $7.2 billion of unclaimed and lost superannuation. This works out to about one in every three Australians who have money in superannuation and don't know about it. As such, it is imperative that Australians take a proactive approach to superannuation by making sure they are always aware of which funds their superannuation contributions are being made to and by rolling over these amounts where practical into a consolidated fund each time they change jobs. By doing so, one can avoid the difficulties involved in having to track down any possible lost money belonging to them after years of neglecting to pay attention to superannuation during employment. Jonathan Bailey is a columnist for Unclaimed Superannuation, a website containing information on superannuation and how to track down lost and unclaimed super.
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