Published: 30/03/2021
Category: Break It Down For Me Super
Published: 30/03/2021
Category: Break It Down For Me Super

Superannuation can be hard to get your head around. We get it.

It’s not exactly a topic of choice over dinner with friends and it’s often hard to understand. It can even be political, and for many, it’s something ‘Future You’ can worry about later.

That’s kind of the issue though. When we’re young, we’re always thinking about the future. But for some reason, we don’t want to think about our future in retirement…

What you do now could make your retirement some of the best days of your life.

So in case you’ve got any questions, check out our handy guide below. Future You will be glad you did.

Superannuation is the difference between a retirement with dignity, opportunity, and choice… or potentially a retirement into poverty. It’s as simple as that.

Prior to superannuation being created, chances are you would have retired onto the pension and – depending on how much you’d saved through your working life – that pension may well have been all you ever had.

Keep in mind, the pension is decided by politicians in Canberra. Superannuation was fought and won by unionised workers, so you can maintain your standard of living in retirement. It’s what sets us apart from many other countries around the world.

Super is paid on top of your wages, over your whole working life, so that when you retire there’s no big shock. You don’t have to drastically change your lifestyle or do away with those little luxuries you’re used to.

Super is there to make your retirement some of the best days of your life.

There’s the nuts and bolts of a superannuation guarantee and what that should look like; how your super should be invested and where; and there’s concern for some of you who were forced to access your super early through COVID-19.

But fundamentally – our superannuation system means Australians retire with dignity. That’s why it’s the envy of the world – and with a few tweaks, it can be even better!

The superannuation guarantee – or SG – is how much super your employer is required, by law, to pay on top of your wage.

Right now, it’s sitting at a minimum of 10 per cent. But in good news, we’re on our way to 12 per cent!

It’s been legislated by the Government that the SG will increase to 10 per cent on July 1 this year, eventually hitting 12 per cent by 2025.

So it’s been promised and it’s just around the corner. In fact, your super was already meant to start climbing back in 2014, when the Abbott Government chose to delay our increase for seven years. But hey, at least it’s nearly here now!

This is a little known rule in the superannuation laws that means you need to earn at least $450 a month before super is paid to themNot only that, the $450 must come from a single employer.

This obviously disadvantages workers who have multiple, low-income jobs, whose income from each employer doesn’t reach that threshold despite possibly working combined full-time hours.

Mostly, it is women, indigenous people, and younger people who are impacted by this bad law.

For example, if you’re a casual working minimum wage, working 18 hours a month would receive around $500 in super a year. 

But if you worked just a few hours less, you’d receive nothing. 

But there’s good news! Unions have been campaigning to remove this unjust law for a long time, and earlier in 2021, we won! 

That means that from 1 July 2022, all workers must receive super for any amount they earn.

Glad you asked. A few per cent here and a few dollars there might not seem like much right now, but over the course of your working life, it’s going to make a huge difference to Future You in retirement.

You might be a hard-working nurse earning $85,000. Just raising the SG to 12 per cent means your employer is now adding an extra $8 per week into your account. Sure, that might just be the cost of a smoothie but it actually works out to be way more than that.

Let’s say you’ve already got $30,000 in your super account by the age of 30. The super guarantee of 12 per cent, with that extra $8 per week, would add more than $123,000 to your account by the time you retire. That’s a lot of smoothies!

And what if you’re the barista? You know, the one making the smoothies…

We’re hopeful you’re earning above the minimum wage (as you should be), so let’s say you’re on $41,000 a year and by the time you’re 30, you’ve also got at least $30,000 in your super account.

By the Morrison Government keeping its promise and simply raising the super guarantee to 12 per cent, you’ll be $59,000 better off in retirement. That’s more than 7,000 smoothies… and you won’t be the one making them!

The numbers above have been crunched thanks to Industry Super Australia’s SG calculator. Give it a go yourself here.

You’ve probably heard of the gender pay gap. But did you know that the gender gap worsens in retirement?

It’s called the gender superannuation gap, and it currently affects nearly half of all retired women in Australia.

Women currently retire with an average of 47% less super than men. For the average super fund, that is $85,000 women are missing out on.

Why is this? Two main reasons.

The first reason is because super is paid as a percentage of your income. Women on average earn less than men, so their overall super is less as a result.

The second reason is because of decisions by the Federal Government. The money you save by making pre-tax contributions to your super, otherwise known as tax concessions, are structured unfairly. The top 20% of income earners receive the lion’s share of tax concessions. But the bottom 30% of income earners, who are mostly women, get next to nothing. Overall, women receive just a third of all government tax concessions.

Want to see what the average gender superannuation pay gap is? Use the Industry Fund Women and Super tool.

The good news? The gender pay gap, and the gender superannuation gap, is much lower for women who are union members. Just another great reason to join your union today.

Yes, it should increase to 12 percent by 2025.

Like we said, this was meant to happen in 2015 but was delayed by seven years by the then Abbott Liberal Government.

As you’ve just seen, that’s a significant amount of money you’ve already missed out on and that’s why it’s incredibly important the super guarantee is raised on the promised time line.

The timeline for the super guarantee to increase is:

  • 10 per cent from 2021
  • 11 per cent from 2023
  • 12 per cent by 2025

So apart from the money you’re losing from any further delay, the fact is that dependant on your age, gender or ethnicity, super can often be less than equal.

Women retire with 47 per cent less super than men on average.

That’s more than half the population with almost half the super as the other half.

Then there’s Indigenous Australians, who prior to 1968 could be paid less than non-Indigenous Australians, and had no access to property or savings.

This, and a number of other compounding factors, sees First Nations people retire with drastically lower superannuation balances than non-Indigenous Australians: men some 50 per cent lower on average, and women 63 per cent lower.

The union movement wants the Morrison Government to keep its promise of 12 per cent by 2025, but ensure women and Indigenous Australians hit that mark at an accelerated rate.

That way, we can focus on reforming our system to be the best, most equal in the world, all while allowing those already left behind to start making up some much needed ground.

If you’ve taken a look at your super account at all through the pandemic, you may have noticed it’s taken a hit.

That’s because the global economy has taken a hit as well. Your super is invested in stocks, property and nation-building assets like airports, roads and ports. Your super may already have bounced back from the lowest point if you haven’t touched it, but rest assured – as the world recovers from the pandemic, so should your super.

This also makes the promised raise of our super guarantee even more important for all of us. We’ve got some ground to make up, especially if you were forced to access your super early by the Morrison Government.

Prior to its eventual inadequate wage subsidy, the Government opened early access to your superannuation.

Between April and December 2020, more than 3.4 million workers needed to jeopardise their retirement by accessing their super early. More than 700,000 workers emptied their accounts completely. 80 per cent of them were under the age of 35.

If this is you, we understand. Forced to choose between paying the rent and your retirement is a decision not taken lightly, especially when the failings of JobKeeper and JobSeeker have left you little choice.

The problem we face now, however, is an entire generation of Australians who will be left behind, paying for coronavirus through both their working and retiring lives. That is unless action is taken now.

A 25-year-old worker who drained their superannuation could have as much as $95,000 less super by the time they retire. You can find your own calculation here via Industry Super Australia, or check out the chart below.

What could withdrawing your super early cost you by retirement?

Withdrawing $5,000
Withdrawing $10,000
Withdrawing $20,000
Source, method and assumptions: Industry Super

And remember the huge difference a few per cent can make when it comes to the super guarantee?

It’s not the sole solution to what is a big problem, but it’s a step in the right direction. Now, more than ever, we need our promised 12 per cent – without further delay.

They sure do – but bosses have said this about every improvement to workers’ wages and conditions since the creation of the 8 Hour Day in 1856 and they’ve been wrong every time.

Penalty rates, parental leave, raising the minimum wage, equal pay and even super itself when it was first won back through the 1980s and 1990s. Employers opposed all of these things, and they’re all proven to improve the lives of all working people.

For a retail worker, the legislated increase to the SG next year means your employer has to pay you roughly $4 extra in super per week. That’s what… one cup of coffee? It’s not even enough for that smoothie we talked about earlier!

Let’s be honest, anyone saying one cup of coffee for their workers each week will cost those workers their job isn’t telling you the truth.

The reality is, the profits of big business are still going up – even despite the pandemic. Meanwhile, the total share of those profits going to workers, and the economy as a whole, is the lowest it’s ever been.

You deserve more. You know you deserve more and your boss can definitely afford it. Unless they’re more worried about their hip pocket than yours…

No – more super does not mean less pay, and here’s why.

No, absolutely not.

Remember the super guarantee should already be 12 per cent, but was frozen by Abbott Government back in 2014?

Not only have you missed out on a considerable amount of super in this time, but wages growth has been flat ever since. No one got a pay rise and no one got increased super either.

The idea that your boss will pay you more if they don’t have to pay your super is simply a false argument. There is no guarantee any repealing of the super guarantee will lead your boss to pay you more – not now, not next year, not by 2025.

It didn’t happen last time and unfortunately, it’s not going to happen again. The only guarantee is the super guarantee.

We’re glad you asked! Absolutely they can. Spouse super contributions are becoming more and more common these days.

If your spouse is earning a low income or taking time off work for caring responsibilities, then it’s likely they’re not earning much super.

You can top up their superannuation by making a Spouse Contribution – and there may be tax benefits for doing so.

Find out more at Industry Super.

This article was updated on 1 November 2021.

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Break it down for me: superannuation

Break it down for me: superannuation