You will now have to wait seven years for the Government to boost the money trickling into your super fund, unless you can afford to take matters into your own hands.

In a deal struck between the Coalition and the Palmer United Party to repeal the mining tax, the compulsory superannuation guarantee will be frozen at 9.5 per cent until 2021.

The guarantee was supposed to rise to 10 per cent in July 2015 and then slowly creep up to 12 per cent by 2019.

Now, the 12 per cent rate will not be reached until 2025, which means any extra super will be up to you.

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The Financial Services Council says retirement savings will be $128 billion worse off by 2025 because of the freeze.

Industry Super Australia calculates that a 25-year-old average income earner will miss out on $100,000 over their working life because of the changes (if they don’t make up the difference themselves).

If true, this is a significant loss, given that superguide.com.au says a single person needs to save up $785,000 to retire comfortably without relying on the age pension, whereas ABS data estimates the average person has only $122,000 in their super at the moment.

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Fifteen per cent is the benchmark for super contributions, according to CareSuper CEO Julie Lander, who previously told The New Daily the higher percentage is especially important for women who are more likely to take time out of work.

Changes to super hit women hardest. Photo: Shutterstock

It seems Australians will have to drastically change their savings habits to make up the losses, women in particular.

According to ME Bank’s latest Household Financial Comfort Report released in August, only 30 per cent of Australians made any extra payments to super in the last six months, down from 34 per cent in the previous half-yearly survey.

Women were even less likely than men to have contributed extra to their super in the last six months, according to the survey. Seventy-four per cent of female respondents had made no additional contributions, compared to 66 per cent of men.

Younger people were also less likely to voluntarily contribute – 74 per cent of Gen X and Y respondents made no extra contributions.

ME Bank spokesperson Matthew Read says the slight drop in contributions is concerning.

“It’s a large proportion of the population [who are not contributing], so in terms of people preparing themselves for retirement there is some concern that not enough people are doing it,” Mr Read says.

Voluntary contributions are one of the best ways to save for retirement, Mr Read says, because of the tax advantages.

“The earlier you put it away, the better off you’ll be later on,” he says.

“What people do with their extra money depends on their circumstances, but as a general rule one shouldn’t forget about superannuation and about retirement. Eventually, we will all reach that age.”

It’s not always better to put extra on your home loan. Photo: AAP

More diverse than a mortgage?

MOZO marketing director Kirsty Lamont says voluntary super contributions may be a good way to diversify your investments, rather than putting every cent you save into your home loan.

“I think it’s important to try and spread your investments out into a number of baskets. That way, if one investment goes pear shaped you’ve still got a back up plan.

“I would always advise that people are identifying a couple of savings and investment goals, and one of those could be to pay down your mortgage, another could be adding extra contributions to your super, and that’s really the best way to get ahead and make sure that you can have the most comfortable retirement,” Ms Lamont says.

To find out if super is a better investment than your mortgage, try out the ASIC MoneySmart calculator here.

Better than a savings account?

Now is a particularly good time to voluntarily contribute, given record-low interest rates, Ms Lamont says. Your extra cash may be better off in a super fund than in a savings account or term deposit because average returns on super are better than the current savings rate of 2.54 per cent.

There are also tax benefits, Ms Lamont says. “If your money is in savings you’re going to get hit with capital gains tax. So there’s a double benefit to investing in superannuation right now.”

Simpler than the stock market?

Ms Lamont acknowledges the share market has performed very well in recent years, but says picking stocks is much more complex than superannuation.

“For the majority of people, it’s very hard to work out which are the right stocks to pick, and that’s why superannuation is a great investment for the average Australian,” she says.

How to do it?

If you want voluntarily contribute to your super, the best way to do it will depend on your income.

As part of the mining tax repeal deal, low-income earners will now be able to take advantage of the Government co-contribution until 2017. There are also benefits for middle and high income earners.

Find out the best way for you to manage your contributions here.

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