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Superannuation : Super saving

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Cite as: (2003) 77(8) LIJ, p.84

It is important to the financial health of retirees that they take an active interest in their superannuation while still working.

As life expectancy is increasing, Australians are spending longer in retirement. However, how enjoyable that retirement is will largely depend on how well it has been saved for.

The Association of Superannuation Funds of Australia (ASFA)[1] reports that life expectancy is now 76 years for men and 82 years for women. Of those retiring over the next few decades, 40 per cent will spend 25 years in retirement and 40 per cent will spend 35 years in retirement.

Depending on individual circumstances, entering a period of retirement of between 25 and 35 years may be financially challenging.

Around 97 per cent of full-time and 76.3 per cent of part-time employees have some superannuation. There have been dramatic increases in superannuation coverage since 1986, especially since the federal government introduced its superannuation guarantee (SG) in July 1992. The SG requires a mini mum rate of superannuation contribution (9 per cent) for all eligible employees.

This is a start, but falls short of the target rate of contribution of 12 to 15 per cent reported by ASFA as potentially appropriate for retirement funding. Depending on individual circumstances the appropriate rate may vary. For instance, an individual closer to retirement with a substantial account balance may not need to contribute at 12 to 15 per cent but at a lower rate as they already have an adequate account balance for retirement. However, workers coming up to retirement in 10 to 15 years without dependants at home may want to contribute more.

Across the industry the average superannuation fund member account balance was $21,000 (December 2002) (up from $15,000 in 1995). Ignoring other savings, this is not a level of retirement savings that will last very long.

Superannuation for all

Almost all of us have superannuation – it is the second largest household asset after the family home – and like any other investment we should take an active interest in its performance.

With an active interest you can design your superannuation to achieve your individual retirement saving goals. Increasingly, superannuation funds offer expanded choices (investment, insurance etc.). This helps individuals tailor their superannuation to achieve their retirement saving plans, including making sure there is sufficient for retirement.

Other people view superannuation as complex and something to be looked after by someone else. Both are fair views, but as it is your retirement savings at stake can there possibly be a better motivator to ensure you oversee your superannuation? Because of the complexity of superannuation, including the myriad of compliance obligations in the industry, a range of service providers offer services aimed at fulfilling the increasingly diverse needs of superannuation funds – including fund administrators, investment consultants, investment managers etc.

However, just because superannuation is complex and often managed by someone else does not mean members should not take an active interest in their superannuation. Superannuation funds exist to service their members – if you have a question call your fund or seek the assistance of another service provider.

One of the first things you should do is ensure that the superannuation you have already accumulated is in one fund.

At December 2002 there were 25 million individual member accounts. ASFA research in January 2003 suggests there are 2.6 member accounts per person.

This means members have 2.6 individual superannuation member accounts in different superannuation funds. Among other implications, members will be paying almost three sets of administration and other fees across the different funds in which they have superannuation.

If you want to consolidate, most large funds have a service where they will arrange the transfer. Just call the fund into which you wish to transfer and they will provide the relevant form. Before transferring, ensure you fully understand the implications of leaving a fund. In particular, confirm any termination fees before leaving a fund.

ANDREW PROEBSTL is the Law Institute superannuation general manager , Legal Industry Superannuation Scheme fund secretary, Law Institute Superannuation Committee secretary and a member of the Victorian Executive of ASFA. He can be contacted on phone 9607 9401, email or visit

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