Almost half of young Australians don’t know where their superannuation is parked, despite the fact they have more invested in super than in the bank.
Research by the Association of Superannuation Funds of Australia (ASFA) found that 40 per cent of Australians under 29 don’t know which fund is holding their super and another 16 per cent have only the vaguest idea of its location.
This lack of knowledge about, and focus on, super is leading young people to make mistakes that will cost them big-time in the long term. Foremost of these is having more than one super account which leaves people paying two or more lots of fees for management and insurance.
More than 30 per cent of young people aged 18–25 have more than one super account and 10 per cent of them have three or more accounts. For those aged 26 to 30, nearly 20 per cent have three or more accounts, ASFA found.
The survey also revealed that more than 60 per cent of young Australians with multiple super accounts remain in that situation due to lack of motivation, or insufficient knowledge, to consolidate them.
Around 30 per cent reported trouble in finding their excess accounts, apparently not realising these can be tracked on the Australian government’s MyGov web site.
Holding multiple funds is so widespread that consumer group CHOICE has estimated that fund members are wasting an average of $131 a year on unnecessary fees. The cost of one excess insurance policy would slice $16,000 from an average retirement balance over a working life, it found.
However a small minority are very engaged, with ASFA finding 6 per cent look up their super balances daily.
Research from Roy Morgan looked at super balances for those aged under 30 generally using data from its own surveys. It found that average balances as of February 2017 stood at $21,200, up 24.7 per cent in five years.
However the median balance, a figure that takes out the distortions caused by a few very high-income earners, stands at $6700, up 21.8 per cent. Roy Morgan data is more up to date than the ABS data ASFA builds on.
ASFA has a dedicated section on its Super Guru website providing information to young people on super. It includes tips on consolidating multiple accounts and checking whether insurance cover meets their needs.
Martin Fahy, ASFA CEO, said though not all young people are aware of it, employers are required to contribute 9.5 per cent of ordinary–=-=-=-=time earnings to super for all employees making more than $450 a month. Even those under 18 must be paid super if they work more than 30 hours per week.
Young people are overly optimistic on their retirement needs with those under 30 estimating they would need $625,000 to retire comfortably. For those 60 years and over the estimate is almost $1 million.
ASFA is also running a competition for young people to help them understand the value of compound interest over time and the lift in retirement living standards that super supports. It offers a prize of $300 cash or $1000 invested in the winner’s super fund.