Retirement, Superannuation

No extra contributions jeopardising super adequacy

The latest Roy Morgan “Single Source Survey” for Australia has revealed the low level of above-compulsory super contributions will present a major retirement funding problem for workers and the federal government.

In the 12 months to October, only 18 per cent of workers with superannuation were contributing beyond the compulsory level of 9.5 per cent, the survey said.

This has been highlighted as a potential problem as it is generally recognised that without additional contributions, the current compulsory level on its own will not provide sufficient funds in retirement for most workers to be self-funding.

The survey comprised in-depth personal interviews conducted face-to-face with over 50,000 Australians in their own homes, including over 23,000 workers with super.

It also found women have closed the contribution gap on men, however, both contribution levels beyond the compulsory level were declining.

When it came to age demographics, older workers who are getting much closer to retirement are ramping up their contribution levels as expected, Roy Morgan said.

The highest level beyond compulsory contributions was among the 55 to 64 segment at 35.2 per cent, well ahead of workers aged 65 and over at 30.7 per cent and the 45 to 54 year olds at 24.4 per cent.

All age groups of workers with super under the age of 45 have below-average levels when it comes to paying contributions above the compulsory level.

The lowest level was 4.0 per cent for those aged 14 to 24, followed by 25 to 34 at 9 per cent and 35 to 44 at 14.9 per cent.

“It’s important to note that not only has the total above-average contribution level fallen since 2009, but it is of concern that it has declined for all age groups,” the survey said.

“The biggest declines were in the 45 to 54 group, down 7.9 percentage points, and those aged 35 to 44, down 6.0 percentage points.”

Roy Morgan industry communications director Norman Morris noted the low level of above-compulsory super contributions presents a major retirement funding problem for workers and the government.

“In addition to the problem relating to the low level of additional contributions, there is the adverse trend that less workers across all age groups are now making additional contributions compared to nine years ago,” Morris said.

“One of the reasons for this decline is the difficulty of engaging workers in what, for most, has been a very long-term time horizon and, as a result, is likely to involve many rule changes.

“Other financial issues are obviously negatively impacting and are related to competing priorities, such as housing affordability, leisure activities and rising household expenses, all in an environment of low wages growth and political uncertainty.”

He said it was also likely the many negative issues coming out of the banking and super royal commission are contributing to the potential for lower levels of engagement in this market.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital