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New retirees doing it tough
Almost 40% of recently retired Australians are struggling financially and more than a quarter are forced to go back to work to pay their bills, a new survey reveals.
Commissioned by Industry Super Australia and conducted by Susan Bell Research, the survey interviewed 734 industry fund members aged 47 and older between December 2019 and January this year.
It shows that 38% of recent retirees are either living on a very tight budget allowing only for essentials, or that they are not able to make ends meet. And, as the gender gap persists, women are worse off.
An average pre-retiring woman has $190,000 in super – just more than half the balance of men at $340,000. The gender inequality can partly be attributed to women spending on average 12 years less in fulltime employment than men to care for their family.
Investment trends report
Latest research shows that fewer than half of working Australians older than 40 believe they are prepared for retirement, and only a quarter of non-retirees think they are contributing enough to retire comfortably.
Leading research firm Investment Trends released its Retirement Income Report this month after an in-depth study of Australians’ attitudes towards retirement issues, drawing on the responses of 5,210 adults between September and October 2019.
The report shows that while 47% of Australians are worried about their retirement prospects, a small increase in super contributions has a significant impact on peace of mind.
“Australians who believe they will live comfortably in retirement typically contribute 11% of their annual household income into their super fund, meaning that an additional contribution of 1.5% a year above the super guarantee level of 9.5% contributes significantly to their peace of mind,” explains King Loong Choi, Senior Analyst at Investment Trends.
“Even among lower income households, a slight increase in super contribution levels corresponds with greater confidence in retirement outcomes.”
Another key finding is that although two in five non-retirees searched for retirement-related information in 2019, only half say they found what they needed. “It is crucial that relevant retirement information is easy to find, since almost 90% of those who successfully find the information they need are highly likely to take further action,” says Choi.
“And the actions these people take are important ones, most often preparing a will, seeking financial advice and making voluntary super contributions. Our research also reveals that Australians who were successful in seeking information from their super fund were more likely to engage with their fund, stay with their fund and consolidate other super monies to their fund.”
New laws for unpaid super
The Morrison Government passed laws on February 24 to reunite Australian workers with their unpaid super with a one-off amnesty to be implemented as an incentive for employers to do the right thing.
Assistant Minister for Superannuation Jane Hume says at least $160 million worth of superannuation payments is expected to be paid to workers who would otherwise miss out.
“Since the one-off amnesty was originally announced back in 2018, over 7,000 employers have already come forward to voluntarily disclose historical unpaid super,” Assistant Minister Hume says. “We estimate an additional 7,000 employers will come forward in the next six months before the amnesty ends.”
To be eligible for the historical underpayment amnesty, employers must pay their staff all their owed super, including the high interest rate, which will make it easier for employees to secure their super without having to hit employers up for the penalties usually associated with late payment.
Employers who do not take advantage of the amnesty will face significantly higher penalties if caught – in general, a minimum 100% penalty on top of the SG shortfall they owe, and up to 200% for the most serious cases.
Throughout the amnesty period the Australian Tax Office will continue its usual audit and enforcement activity against employers for historical obligations they do not own up to voluntarily.
“We encourage employers to check they don’t owe outstanding super and, if they do, to take advantage of this once-only opportunity to set things right before much tougher penalties apply,” Assistant Minister Hume says.
Customer satisfaction winners
Australian businesses with the highest levels of customer satisfaction were celebrated at the 2019 Roy Morgan Customer Satisfaction Awards in Melbourne last month.
Six new banking and finance categories were added to this year’s awards, taking the total list of winning banks, insurers and superannuation funds to 14.
In the banking category, Commonwealth Bank remained dominant securing the Major Bank of the Year Award for the seventh time straight. Bank Australia and Newcastle Permanent Credit Union both recorded their first wins.
The Retail Superannuation Fund of the Year Award went to Macquarie. Colonial First State and HESTA were both winners in their super fund categories.
Insurance companies RACT and RAC both won General Insurer and Major General Insurer of the Year Awards respectively. Insuranceline took out its third annual award and MLC was a first-time winner. Private health insurers St. Lukes Health, Defence Health and ahm were also category successes.
New Super gap research
Industry Super Australia (ISA) and Women In Super (WIS) are calling on the federal government to bridge the super gender gap.
New research by ISA reveals the gender pay gap widens when it comes to retirement savings, with men having $282 billion more in their super funds and on average retire with $90,000 more in their accounts than women.
Analysis of tax file and ABS data shows that, on average, women have less super than men at every life stage. The super balance gender gap begins to expand when a woman hits her 30s, the average super balance gap doubles from 15% at 30 to 30% once a woman reaches her 40s.
Men also receive $11 billion more in employer contributions each year than women and one in three women retire with no super balance at all, according to a 2016 Senate report.
Factors contributing to the widening gender pay gap include women still being more likely to leave the paid workforce to do unpaid caring work for children or other family members. Wages in female dominated sectors such as nursing and teaching are lower than in male dominated sectors such as mining, and women are generally paid lower wages than their male counterparts when doing the same work.
Chief executives from ISA and WIS are lobbying to abolish the $450 super contributions threshold, where super is only paid if an employee earns more than $450 a month. Paying super on Commonwealth paid parental leave will help parents accumulate money while taking time off work and sticking to the promised increase of the guaranteed super rate from 9.5% to 12% will all help close the gap.