Different work patterns and incomes mean that Australians don’t end up with the same super balances when they retire. That’s why the Government is set to look at changes that could give Australians with interrupted work patterns more flexibility to boost their retirement savings.
Women’s economic security in retirement is the focus. After all, there is a gender pay gap of 17.9%¹ and women are more likely to leave work to raise children and care for family. As it stands, the average super balances at retirement are $197,000 for men and $105,000 for women.²
But when it comes to your future financial security, you don’t need to wait for change to happen. There are steps you can take now.
“Regardless of how far you are through your working life, it’s never too early or late to put your retirement savings on a better course,” say Meaghan Noble, Commonwealth Bank’s Executive Manager Women and Advice.
What could be changing?
One of the proposed changes involves more flexible rules around super contributions for those who take time out from the workforce. “This means when people are in a position to play catch up, they’re less likely to bump up against limitations,” says Noble.
The reason the proposed changes could be great news for women is that, despite the evolving nature of family roles, women remain more likely to take themselves out of paid employment to care for children and other family members.”
Noble adds that despite the proposed changes, there are way you can take control of your super today.
The first step – don’t underestimate what you can do for your own financial wellbeing
“The first step is simply about taking ownership and valuing your financial wellbeing,” say Noble. “If you’re in a relationship, it makes complete sense to work towards your retirement goals as a team, but that is quite different to relinquishing your involvement. Don’t underestimate your own capabilities.”
ASIC’s MoneySmart superannuation calculator could give you an idea of where you stand now by letting you work out how much super you’ll have when you retire.
Claim your lost super
You might have super lying around in forgotten super funds if you’ve had more than one employer. Check and manager your super through your myGov account.
Avoid unnecessary super fees
You may want to consider brining all your super into one fund to avoid multiple administration fees chipping away at your retirement savings.³
Add more to your super
“Super is generally taxed concessionally, making it a great investment,” say Noble, who recommends knowing your options and getting advice to make sure you choose the right strategies for you.
Your options include:
- Salary sacrifice – this can be a relatively simple yet effective way to give your super a boost, if you earn over a certain amount. It involves asking your employer to put a bit of your salary to super before it’s taxed. If you stay within certain contributions limits, you can take advantage of super’s concessional tax rate of 15%, which may be lower than your marginal tax rate.
- After-tax contributions – these come from after-tax money for which you don’t claim a tax deduction. These contributions are tax-free if you stick to the contributions limits.
- Spouse contributions – this is where one spouse puts after-tax money into the super of a non-working or low-income earning spouse, and may receive a tax rebate.
- Splitting contributions – this is where concessional (before-tax) contributions are re-directed to a spouse’s fund in subsequent financial years. You can find out more at the ATO website.
¹Gender pay gap statistics factsheet, wgea.gov.au, September 2015.
²Association of Superannuation Funds of Australia (ASFA)’s SuperGuru website, superguru.com.au, accessed 15 October 2015
³Before bringing your accounts together you should consider fees, loss of insurance cover you may hold, costs for withdrawing from your other super funds and any investment or tax implications.
This document has been prepare by Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) based on its understanding of current regulatory requirements and laws as at 15 December 2015. While all care has been taken in the preparation of this document (using sources believed to be reliable and accurate), to the maximum extent permitted by law, no person including Colonial First State or any member of the Commonwealth Bank group of companies, accepts responsibility for any loss suffered by any person arising from reliance on this information.