When it comes to our superannuation, there is one costly mistake millions of us make – we have more than one account.
Research from the Productivity Commission has shed new light on the issue, finding a third of superannuation accounts in Australia – about 10 million – are unintended multiple accounts. And the effect of this duplication is huge.
Industry Super Australia chief executive Bernie Dean says the report shows multiple accounts are costing Australians a whopping $2.6 billion each year in lost retirement savings.
“Multiple accounts mean multiple account fees and insurance premiums that can eat away at your savings,” Mr Dean explains.
About $690 million is lost annually in additional administration fees, while $1.9 billion a year is lost to extra insurance premiums.
The compound effect over decades can leave the average full-time worker short-changed at retirement by 6 per cent or $51,000.
The Productivity Commission also found that young and lower-income Australians are most affected by the twin issues of multiple accounts and underperformance of default funds.
“Because of the way the system is set up at the moment where employers nominate a default super fund, when people enter the workforce, or change jobs, they are defaulted into that fund,” Mr Dean says.
“So, if you’re a young person who works multiple jobs, or starts off in retail, then shifts to hospitality before starting a job in the corporate sector, you are highly likely to have multiple super accounts.”
Later this year, the stakes will get even higher.
Government changes to superannuation – coming into effect on October 31 – will see all inactive, low-balance accounts under $6000 automatically rolled over to the Australian Taxation Office.
The ATO will then try to connect the savings from those accounts with active accounts held by the same person, but if not matched they will receive an investment return only at Consumer Price Index (CPI), which is lower than most industry super funds.
According to Mr Dean, over the past 14 years, the average industry super fund has achieved returns almost 4.5 per cent higher than CPI.
‘‘I’m sure it won’t be a surprise to most of your readers that governments are good at taking money – not so much at giving it back,’’ Mr Dean says.
‘‘They’re trying to take care of the problem for us – but, like most things too good to be true, there’s a catch.’’
The quickest and easiest way to deal with this and get your savings back is to consolidate your accounts. And the good news is that super consolidation has never been easier.
The days of paperwork piled to the ceiling are behind us. These days, it’s as simple as clicking a button.
Simply log on to MyGov, link your account to the ATO with your tax file number, choose the Super tab and opt to transfer funds into your preferred account.
Alternatively, your Industry SuperFund can also help via email, phone or by logging into your online account.
Make consolidating your super a priority now and you’ll reap the rewards.
Industry SuperFunds have an easy-to-understand guide on how to consolidate here. With 15 Industry SuperFunds to choose from, there is one for every type of worker. Industry SuperFunds are run only to benefit members, have low fees and have never paid commissions to financial planners.