When it comes to preparing for retirement, Australia has one of the best superannuation systems in the world.
But it's far from perfect.
Especially for our younger workers.
So, while the superannuation rule that we'll look at below may not be impacting you directly, there's a fair chance it could be hampering the retirement building wealth of your kids or grandkids.
Image source: Getty Images
$411 million in superannuation denied every year
According to the Super Members Council (SMC), there's an "outdated rule" on the books that needs to go.
Specifically, the rule denies some 530,000 part-time workers under the age of 18 the guaranteed 12% in employer-provided super contributions most Aussies take for granted.
That number is up from around 505,000 Australian teenagers impacted by the rule two years ago.
The latest data from the SMC shows that these young workers will forego an average of $780 a year in superannuation contributions. That works out to a total of $411 million a year, up 7% from two years ago.
To secure access to guaranteed super payments, workers under the age of 18 need to work at least 30 hours per week for a single employer.
That doesn't sit well with Super Members Council CEO Misha Schubert.
"More than half a million young Australians are missing out on a workplace right to super that 17 million Australians have, and that's just not fair," she said.
Schubert added:
Australia's super system is meant to be universal. This outdated age-based exclusion is denying hundreds of thousands of teenage workers the opportunity to start building their retirement savings.
Schubert noted that 91% of under-18 workers are employed for fewer than 30 hours a week for a single employer.
According to the SMC, your typical teenager who spends at least two years in part-time work before turning 18 could miss out on around $2,500 in superannuation contributions. That could leave them $11,000 (in current dollars) poorer when it comes time to retire.
As with investing in ASX shares, this highlights the power of compounding and the importance of starting early.
According to Schubert:
The earliest contributions into your super make the biggest difference to how much super you'll end up with because they have the longest time to grow. A few thousand dollars missed during a teenager's first years of work can become more than ten thousand dollars lost by retirement.
And the superannuation rule more often impacts teenage women than teenage men, as young men are more likely to work full time before the age of 18.
Schubert concluded:
The gender super gap doesn't suddenly appear later in life. For many women, it starts from their very first job. Scrapping this outdated exclusion would ensure the next generation of young women get a fairer start to their retirement savings.
