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Personal Finance Information |
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Introduction to Australian Superannuation
Australians, in general, constitute some of the worst savers inthe world. Current estimates suggest that, on average, Australianssave 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 pensionsfor senior citizens upon their retirement. However, because of theincreased life expectancy of Australians coupled with the decreasein 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 wherebyemployers are obligated via the superannuation guarantee tocontribute at least 9% of an employee's wage to a superannuationfund which must be preserved until the employee has reachedretirement before it can be accessed. The advantage of making contributions to superannuation are thatit introduces a form of forced savings for Australians intoa fund which will hopefully invest the money into the appropriateassets for increasing its value over the long term. As an added incentive, contributions to superannuation are onlytaxed at a marginal rate of just 15%. For most income earnersin Australia, this will be more attractive than the usually hightax rate that they would be subjected to if their money wasnot put into superannuation. A disadvantage of the superannuation scheme is that many Australians,particularly those who change employers regularly, are likely tohave various small amounts of money in a number of separatesuperannuation funds. This, in turn, can lead to a decrease in earnings as each fund willintroduce any number of fees for maintaining the account. Moresignificantly, a member account in a superannuation fund can possiblybe forgotten in time and become unclaimed. It is estimated that there is currently more than $7.2 billion ofunclaimed and lost superannuation. This works out to about onein every three Australians who have money in superannuationand don't know about it. As such, it is imperative that Australians take a proactive approachto superannuation by making sure they are always aware of which funds theirsuperannuation contributions are being made to and by rolling overthese amounts where practical into a consolidated fund each timethey change jobs. By doing so, one can avoid the difficulties involved in having totrack down any possible lost money belonging to them after yearsof 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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