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Boosting Your Superannuation: The Impact of the Super Guarantee Increase
As of July 1, 2023, Australian workers can expect an automatic uplift in their retirement savings, thanks to a scheduled increase in compulsory superannuation contributions. This adjustment, from 11.5% to 12%, is the final legislated increment, marking a significant change in how much employers contribute to their employees’ superannuation funds.
Financial Benefits of the Increase
Financial adviser Jess Bell from Findex elaborated on the potential financial benefits of this additional contribution. According to her, although a 0.5% increase may appear minimal, its compounded effect over a span of 30 years can yield substantial gains.
For instance, an individual with an annual salary of AUD 70,000 would see an increase of approximately AUD 350 directed to their superannuation each year. By retirement, based on a conservative 6% annual return, this could translate into an additional boost of about AUD 29,000.
Total Compensation and Salary Packages
It’s important to note that while the super guarantee increase does not result in immediate cash pay increases, it does enhance the overall value of salary packages offered to employees. The uptick means that employees can expect their total return from their employers to rise, making it a pivotal moment for workers to review their superannuation savings.
Jess Bell emphasised the significance of actively monitoring one’s super: “If people forget about their super, that’s probably to their own detriment.” Therefore, this change serves as a timely reminder for individuals to assess their superannuation plans actively.
Conducting a Superannuation Health Check
For those considering a review of their superannuation, Bell suggests examining key factors such as:
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Investment Choices: The right investments depend on individual circumstances, including risk tolerance and investment timeline. For long-term investments, typically over ten years, individuals may lean towards riskier assets for greater growth potential.
- Fees and Insurance: Review the fees associated with different super funds and the type of insurance included in the superannuation package.
Bell also highlights that even small additional personal contributions can have a significant compound effect on retirement savings. For example, contributing an extra AUD 50 per week, which equates to about AUD 36 from take-home pay, can substantially improve superannuation outcomes over time.
Additional Changes from July 1
In conjunction with the super guarantee rate increase, other significant changes are effective from July 1:
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Superannuation Contributions on Parental Leave Pay: Parents receiving government support will now have 12% of their Parental Leave Pay contributed to their superannuation fund.
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Transfer Balance Cap Increase: The cap, which limits the amount of super that can transition into retirement, will increase from AUD 1.9 million to AUD 2 million.
- Contribution Caps: The concessional contributions cap remains unchanged at AUD 30,000, while the non-concessional contributions cap stays at AUD 120,000.
Practical Steps to Engage with Your Super
For individuals looking to optimise their superannuation, using resources such as the ATO’s Your Super tool can provide clarity on comparing fees and performance across different super funds.
Furthermore, before making any changes to super funds, it’s crucial to consider any insurance ramifications and potential exclusions that may arise as a result of switching funds.
Conclusion
The increase in the super guarantee rate is a pivotal opportunity for Australian workers to enhance their retirement savings strategy significantly. During this period of adjustment, it is essential for individuals to actively engage with their superannuation, ensuring they’re making informed decisions that align with their financial goals for a more secure retirement.
