We need to declare a war on wasted superannuation
By Sally Loane
If “lost” superannuation was tangible, the scene would resemble the wasteland of dead fish clogging our depleted Murray-Darling Basin.
Twenty-seven years of ambivalence and neglect has resulted in 10 million zombie super accounts, bulging with billions of dollars of our hard-earned wages being steadily eroded by fees, littering our economic landscape.
We righteously (and rightfully) declare war on waste. Plastic bags, bottles and batteries, even food, we’re constantly being urged be more frugal, pick up, recycle and switch to more eco-friendly products.
So why in heaven’s name have we allowed such massive waste to occur with our super money?
The Productivity Commission’s work on analysing the efficiency and competitiveness of our almost – $3 trillion superannuation system has identified some of the causes. Extraordinarily, 80 per cent of working Australians don’t make a choice of a super fund when they get their first job. Or their second, or their third, and so on.
This is how people end up with multiple accounts and forget or never understand that they can and should merge them. The antiquated industrial legal system which still controls most super enables this, and we as a nation have never fixed it. It beggars belief that people care so little about this critical slice of their money (nearly 10 per cent of their wage) that they let their boss choose a super fund for them. Who would let their boss choose a bank account for them, or make decisions for them about where to live or what car to drive?
The waste in super is shocking – the PC found a staggering 10 million super accounts, a third of the total, are unintended multiple accounts, the balances of which are eroded by $2.6 billion each year in unnecessary fees and duplicate insurance. It’s time we cleaned it up.
Step one is for every single Australian, when they get their first paid job, to think about super. Because it’s compulsory. And it’s nearly 10 per cent of weekly wages – that’s a lot of beer money.
Step two is to make a choice about where you put it. You might want to open the ASIC MoneySmart app (easy), ask friends or family, an adviser, do a bit of digging. It seems complex – because it’s MONEY – but in reality it should be no more work than researching the best car to buy. And we all put a huge amount of effort into that, right? Of course it’s easier to picture your present self in your new car, than it is to imagine yourself at 65, retired and probably bald or grey, but you just have to go with this. If you don’t, that future 65 year old – you – will be poor as well as grey or bald.
Step three, make sure you can take your fund with you when you change jobs. Unless you make an active choice to swap super funds, it is possible to keep one for every new job you start, like your bank account. If your new boss says you can’t, ask why.
If we approach our own financial future with the same passion many of us put into campaigning against waste, pollution and climate change, we will fix this problem ourselves, long before the partisan 30 Year superannuation wars our politicians are fighting will ever end.
Step four, if you end up with multiple super accounts, consolidate them in the fund that works best for you and your money.
We really do have a world-class superannuation system and it is working, albeit slowly, to help us support ourselves in retirement. Policy change will help, but there is only one silver bullet to get the best for ourselves: we all need to engage with our super money from day one.
Sally Loane is the CEO of the Financial Services Council.