'If you are low or middle income earner the superannuation co-contribution scheme is worth looking at.'
Superannuation is a bit like oxygen, it’s something you usually don’t spend much time thinking about – but if something goes wrong with it will be the only thing on your mind. However it shouldn’t be put on the backburner, particularly for women.
This is because while women tend to live longer than men, they also usually have less super. In a 2011 report from the Association of Superannuation Funds of Australia women’s average super balance was found to be around $65,800, while men’s came in at a much higher $105,000. So it’s absolutely crucial for women to focus on becoming financially literate and maximising their super in the smartest ways possible. Robert Drake, senior executive with ASIC’s MoneySmart explains the best way to get your super looking, well, super...
Consolidate your funds
With the changing workforce it’s become incredibly common to hold many jobs over one’s lifetime – the after-school job as a teenager, casual work at university and then different jobs as the career ladder is climbed. As a result people can end up with a tangled mess of numerous super funds, which is a big problem because multiple funds means multiple fees and less money in one’s super account in the long term. Taking the time to transfer all the funds picked up along the way into your current preferred fund will not only save on fees, it will also make it easier to keep track of what is going on with your super.
Seek out lost super
There are tools to find funds for those not sure as to what old accounts might be floating around. The Australian Tax Office has set up SuperSeeker, an easy way to find out what funds are linked to your tax file number.
Start a new job right
In the flurry of getting a new job sometimes paperwork is rushed. One thing that should always be a high priority is including your tax file number on any employment documents. It is through this that the ATO is able to track your super fund and it is much less likely to become ‘lost’ if you change jobs down the track.
Drake also recommends having your current super fund details on hand so another super account isn’t created. “When you change jobs you don’t have to change super funds, or you don’t have to get an extra super fund. Just like you tell an employer, this is my bank account and this is where my pay should go, say this is my super account and this is where I want my super to go. Keep it together.”
Share super with your partner
One of the reasons women’s super is so low compared to men’s is that they are more likely to go in and out of the workforce or move to part-time over full-time work while raising children. Since for many the main source of super comes from their wage this puts a dent in retirement funds. “In the same way as if only one person was earning you’d take some of that pay packet and share it with your partner, do the same with super,” says Drake. So if you are raising children, or plan to, make sure during that period that you are continuing to get super. This can be done by transferring the breadwinner’s super over to the super account in the name of whoever is doing the childrearing.
Negotiate on your salary
Another factor in the lower super of women is that of the gender pay gap. Since superannuation paid by the employer is calculated as a percentage of wage this negatively affects the super funds of women, so negotiating on one’s salary means higher super. “Women earn less on average than men, even for doing the same jobs, so there’s no harm in asking for a salary raise or a better salary package,” advises Drake.
Make extra contributions
Don’t just rely on employer super contributions. You can add more cash to your super in two ways. If you are low or middle income earner the superannuation co-contribution scheme is worth looking at. “If you earn less than about $48,000 then the government will match some of the contributions you put in. For each dollar you put in the government will put in 50 cents, so you can get a free $500 there,” says Drake.
For people earning more salary sacrificing can be the most cost-effective choice. “It’s a way of putting money into super while saving tax at the same time,” explains Drake. “Instead of paying tax on your income and then putting some money aside for your retirement, you can put money straight into your super account before income tax is taken out.”
And if you hate maths, MoneySmart has an online tool called the Super Contributions Optimiser which does all the calculations to figure out the best contributions method for your income level.
Keep a close eye on your super
Don’t just stick your head in the sand when it comes to super. It only takes a little bit of effort to sort out and due to the power of compound interest the sooner your super affairs are in order, the more money you’ll have come retirement.
“There can be an initial thing about, ‘Oh, super sounds really complicated and it doesn’t feel relevant to me day to day’, but having a goal in mind really gives you a sense of being in control and moving forward in your life,” says Drake. “It might only be small steps, but people feel really better for having taken some control.”