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Automatic Superannuation Boost for Nearly 10 Million Australians
Starting July 1, 2023, Australian workers will benefit from an automatic increase in their superannuation contributions, with the superannuation guarantee (SG) rate rising from 11.5% to 12%. This adjustment is expected to significantly enhance the retirement savings for nearly 10 million Australians and will translate to approximately an additional $317 in contributions for the average worker in the coming financial year.
Understanding the Impact of the Increase
This increase follows a series of scheduled hikes to the SG rate, which initiated in 2021, culminating in this final adjustment. The ramifications are particularly noteworthy for younger workers; for instance, a typical 30-year-old is projected to retire with approximately $22,000 more in their superannuation owing to this 0.5% increment. When considered alongside prior increases from the previous base of 9%, this boost could amount to an impressive additional $132,000 in superannuation savings by the time these individuals reach retirement.
Research conducted by the Superannuation Members Council indicated that a 30-year-old currently holding $30,000 in superannuation and earning the median wage could amass around $610,000 by retirement, far exceeding the current requirement of $595,000 to secure a comfortable lifestyle post-retirement.
Misha Schubert, CEO of Super Members Council, emphasised the significance of these superannuation increases, highlighting their role in ensuring a secure and fulfilling retirement for Australians, ultimately leading to expanded choices and opportunities in later life.
Key Demographics Affected
The majority of beneficiaries from this super boost are young workers, with more than half of those benefiting being under the age of 40. Notably, approximately one-third of individuals receiving the increased SG earn less than $50,000 annually, while about 70% have incomes below $100,000.
Additionally, a noteworthy change is coming for Australians on paid parental leave, as they too will begin to receive superannuation contributions starting next month. This measure further broadens the support provided to Australians during significant life events.
Future Changes and Economic Context
Looking ahead, "payday super" rules will be implemented from July 1, 2026, mandating that employers contribute superannuation to employees’ funds concurrently with wage payments. This upcoming change comes amidst rising living costs, where essentials such as food and healthcare continue to escalate.
According to the ASFA Retirement Standard, the cost of a comfortable retirement has increased by 1.6% over the last year, albeit at a slower pace than the overall inflation rate of 2.4%. Singles now require an annual income of $52,383 for a comfortable retirement, while couples need $73,875. To achieve this, singles must have a superannuation balance of $595,000, while couples should aim for $690,000 by age 67.
Final Thoughts
As inflation shows signs of slowing, the rising prices of necessities serve as a reminder of the importance of careful retirement planning. Mary Delahunty, ASFA CEO, commented on this milestone for Australia’s retirement system, asserting that with the increase to 12%, superannuation is progressing towards providing Australians with a dignified retirement.
In summary, the upcoming increase in superannuation contributions will undeniably have a lasting positive effect on the retirement savings of millions of Australians, enhancing financial security during their retirement years.
Note: For any inquiries or stories to share, reach out to Tamika Seeto at tamika.seeto@yahooinc.com.
