Why and how stapled superannuation is going to make managing your super a whole lot easier.
What’s the fuss about super?
For us in the younger generation who have compound interest on our side, the greatest investment vehicle that we have available in Australia is our superannuation.
Super is a compulsory investment account designed to support you in later life. It involves making regular investments held in a tax effective environment for the length of you working life. A little planning while you are young, will likely allow your superannuation to provide you with a very comfortable lifestyle in retirement.
It is never too early, or late, to start planning for a comfortable retirement.
Over the last few years, the government has been implementing measures to help increase superannuation balances. This means our ageing population will become less reliant on the age pension in retirement.
This is important to note. Realistically, if you were to live off the current aged pension, you may not be able to do everything you want in later life. It simply would not support a comfortable lifestyle for most people.
In an effort to limit erosion in superannuation and make it easier to manage, they introduced ‘stapled’ superannuation in June 2021. Going forward in your career, your current superannuation account is ‘stapled’ to you and requires your employers for the rest of your working life to make your payments to this super account, unless you instruct them otherwise.
How will these changes work?
Although the government has already tried to have people consolidate their superannuation, you may currently still have multiple accounts in your name. In this case, the ATO will look at your accounts and staple one for you (this will likely be the account currently receiving contributions).
As it is inaccessible until we have retired, we often underestimate the benefits of superannuation while we are young. However, I do see this realisation occur when clients are nearing retirement that superannuation is the key. Utilising these changes while we are young will significantly help you build a greater retirement balance through fee savings alone. As younger people typically transition jobs more often, you likely already hold an assortment of different super accounts.
These changes will boost your super and benefit you in the long term.
With super providers often having a minimum administration fee, holding multiple accounts is detrimental to us with a significantly smaller super balance. As an example, holding $20,000 solely within an Australian Retirement Trust super account is 250% cheaper on the minimum admin fee compared to holding $10,000 in both an Australian Retirement Trust and Australian Super account.
With the government helping to boost our superannuation through their policy changes. With more planning to ensure we have an appropriate super account for the rest of our working life, we can significantly benefit as we become older.
This makes it essential for those of you who have recently begun your careers to reach out and ensure you have the best opportunity to fund your retirement how you wish.