The compulsory level of superannuation may not be enough for when you retire, at least according to new research.
Australia’s superannuation program provides workers with a nest egg for their retirement, but new research from Roy Morgan suggests this may not be enough, with the mandatory level of 9.5 per cent not likely to provide “sufficient funds” for self-funding workers in retirement.
The research was punctuated by further information, which found that only 18 per cent of workers with superannuation were contributing beyond the compulsory 9.5 per cent, which can help to improve the retirement fund’s value at the time it is accessible.
Interestingly, while some Australians do contribute to their super and raise the amount that is saved, the number has dropped, with 2018’s 18 per cent figure noticeably different from 2009’s 23 per cent.
Out of the people contributing, the majority of workers making those contributions are over the age of 45, with the numbers increasing as they approach the age they can withdraw their super. That should come as no surprise, with the 55 to 64 age segment showing 35.2 per cent contributions beyond the compulsory amount, though even workers ages 65 and over revealed 30.7 per cent were going beyond what was required.
“The low level of above compulsory superannuation contributions presents a major retirement funding problem for workers and the government,” said Roy Morgan Industry Communications Director Norman Morris.
“In addition to the problem relating to the low level of additional contributions, there is the adverse trend that less workers across all age groups are now making additional contributions compared to nine years ago. One of the reasons for this decline is the difficulty of engaging workers in what for most has a very long term time horizon and as a result is likely to involve many rule changes,” he said.
“Other financial issues are obviously negatively impacting and are related to competing priorities such as housing affordability, leisure activities, rising household expenses, all in an environment of low wages growth and political uncertainty. It is also likely that the many negative issues coming out of the Finance Royal Commission are contributing to the potential for lower levels of engagement in this market.”
While contributions beyond the 9.5 per cent super required by employers can help increase a superannuation amount upon payout, another option is to consider switching to alternate super funds.