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New superannuation cash boost for Aussies: Winners and losers

Have you checked your super balance lately? Chances are, without compulsory superannuation, you wouldn't have saved the money that's now in your account.

Younger workers are likely to be largely nonplussed by the fact that their employers currently pay 11 per cent of their gross income into a superannuation account on their behalf. This is simply because they cannot access those funds until they retire, probably at age 67.

For those in their 20s, 30s and 40s, it is a wait of many decades before that forced saving into superannuation can be tapped.

For a worker on average annual full-time total earnings - estimated by the Australian Bureau of Statistics to be $102,000 - that is more than $11,000 per annum paid into their superannuation account. And as pay rises come through in the years ahead, so too will the contribution to superannuation.

Young woman working on an aircraft part, and an older couple smiling, superannuation.
Today's younger workers are likely to retire with enough superannuation to enjoy a decent retirement. (Getty)

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For that worker on or about average full-time earnings for the past 20 years in unbroken employment - that is around 40 to 45 years old in very general terms - their superannuation balance is likely to be around $150,000 to $175,000, depending on the investment returns of their fund manager.

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For someone in the workforce for 10 years, on an annual income of two-thirds of full-time earnings, around $65,000 in today’s dollars, their superannuation balance is likely to be around $40,000 to $50,000, again depending on the investment performance of their fund manager.

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These are decent nest eggs that will only grow over the decades ahead until these folks in their 30s or 40s eventually retire.

The good news is that the superannuation contribution will rise to 11.5 per cent of income from July 1 and then rise further to 12 per cent from July 1, 2025. This will speed up the growth in retirement savings and, with that, the financial well-being of all workers.

Whatever your age, have a look at your superannuation balance – you might be pleasantly surprised. These contributions, with good investment returns, boost savings at a rapid rate.

Not so good for current-day retirees

For older workers, within sight of retirement, contributions and growth in superannuation savings are critically important as they get closer to tapping their nest egg.

Note that compulsory superannuation was not introduced until 1992, when just 3 per cent of income was paid into each worker’s account. This contribution rose to 9 per cent of income by 2002.

This start date and scaling up of contributions means many of those aged 65 today had effectively zero superannuation in the first decade of their paid employment and only moderate contributions over the next decade. That is why many people retiring now have a less than fulsome superannuation balance and will require access to the age pension to have a decent retirement.

This is unlike younger folk today, who are likely to eventually retire with enough superannuation to enjoy a decent retirement without the need for the pension.

This unsurprising issue is not a problem with superannuation, but rather a well-acknowledged understanding of how the implementation of superannuation three decades ago was a long-run strategy to boost national savings and ease future pressures on the budget from a fuller reliance on a government-paid age pension.

The transition is happening now.

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Based on current rules, someone joining the paid workforce in the next year or so at age 22 will have 45 years of savings at 12 per cent of their income paid into their superannuation.

They will retire very comfortably.

What’s more, in recent times, investment returns on superannuation funds have been robust. Stock markets have hit record highs, bonds are doing well, property and alternative assets are reasonable to buoyant.

These strong returns are adding to superannuation balances.

There are some issues, whatever your age

It is important to manage your superannuation account. This means ensuring your employer is making the regulatory contributions in full and on time. There are many examples of ‘superannuation theft’ - where employers fail to pay the required benefit into superannuation funds - so, make sure the money is being paid.

Also, check your investment strategy. In broad terms - and this is NOT investment advice - young people should have a bias toward growth funds, the middle-aged should have a balanced fund and older folk should be more conservative in their investment strategy.

And when you do check your superannuation balance, ask yourself, without compulsory superannuation would you have saved the money that is in your account? You may have, but it’s likely most people would not have saved that money for their retirement.

This is why superannuation is such a good thing for individuals and for the nation as savings levels build.