Introduction to Australian Superannuation
Australians, in general, constitute some of the worst savers in
the world. Current estimates suggest that, on average, Australians
save just 4% of their income. This is less than half of the 11%
estimate for Australians in the late 1970s. In the past, pensions from taxpayers were used to provide pensions
for senior citizens upon their retirement. However, because of the
increased life expectancy of Australians coupled with the decrease
in the average number of children per household, the use of pensions,
if persisted with, will put a significant strain on the Federal Budget. As a result, the concept of superannuation was introduced whereby
employers are obligated via the superannuation guarantee to
contribute at least 9% of an employee's wage to a superannuation
fund which must be preserved until the employee has reached
retirement before it can be accessed. The advantage of making contributions to superannuation are that
it introduces a form of forced savings for Australians into
a fund which will hopefully invest the money into the appropriate
assets for increasing its value over the long term. As an added incentive, contributions to superannuation are only
taxed at a marginal rate of just 15%. For most income earners
in Australia, this will be more attractive than the usually high
tax rate that they would be subjected to if their money was
not put into superannuation. A disadvantage of the superannuation scheme is that many Australians,
particularly those who change employers regularly, are likely to
have various small amounts of money in a number of separate
superannuation funds. This, in turn, can lead to a decrease in earnings as each fund will
introduce any number of fees for maintaining the account. More
significantly, a member account in a superannuation fund can possibly
be forgotten in time and become unclaimed. It is estimated that there is currently more than $7.2 billion of
unclaimed and lost superannuation. This works out to about one
in every three Australians who have money in superannuation
and don't know about it. As such, it is imperative that Australians take a proactive approach
to superannuation by making sure they are always aware of which funds their
superannuation contributions are being made to and by rolling over
these amounts where practical into a consolidated fund each time
they change jobs. By doing so, one can avoid the difficulties involved in having to
track down any possible lost money belonging to them after years
of neglecting to pay attention to superannuation during employment. Jonathan Bailey is a columnist for Unclaimed Superannuation, a website containing information on superannuation and how to track down lost and unclaimed super.
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