The negligence and apathy with which Australians treat their superannuation continues to constantly baffle me. I can almost guarantee that a disturbingly high percentage of people, if asked, would not be able to name their super balance, nor how much in fees they are being charged, and maybe even the name of their super fund altogether.
Back when compulsory superannuation was introduced in 1992, there was a significant chunk of the community that believed it was a mistake – protesting the government's 'right' to take what is now at least 9.5% of your salary and lock it away on your behalf. I think it's fair to say that group's influence has declined over the years as Australians continue to appreciate the financial security this arrangement can provide (not to mention the tax benefits).
Why is super important?
Call me a pessimist, but I have serious doubts over the ability of the government to provide an adequate aged pension in the decades ahead. The pension, while a completely necessary social safety net, is already the single biggest cost to the budget every year (over 25 years since super was brought in). Statistics show that back in the 1970s, there were around 7 working people per retiree. Today that number is around 4 and many are predicting that, on current trends, it could be closer to 2 by mid-century. It's difficult enough for the state to fund the pension today, so I'm not looking forward to seeing what will happen in 10 or 20 years' time.
That's why super is important. It's the only Plan A we have before having to go to Plan B – and as I've just described, Plan B isn't looking too crash hot.
What can we do to help our super?
Understanding how super works and the options and shelters our tax system gives your super fund is a fantastic start. There are rules surrounding super that might enable you to save a significant amount of money – remember, for most people (up to a limit), it is legal to make additional contributions to your super from pre-tax dollars (a free kick if I ever saw one). And once you flick the switch to pension phase, the income is usually tax free.
Of course, everyone's circumstances are different and you should always consult with a qualified advisor to see what works best for you, but I can almost guarantee that it's worth finding out.
