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SBS Australia
03-07-2025
- Business
- SBS Australia
'More can be done': The knowledge gap Australians have with their retirement nest egg
The final increase to the superannuation guarantee has taken effect, meaning employers are now required to pay a minimum contribution of 12 per cent into their employees' super funds. But around a third of people are unaware where their retirement funds are invested — a similar proportion don't know their super balance, and one in 10 have never checked. These were the findings of a survey of 3,146 Australians conducted by the Commonwealth Bank, which suggested the knowledge gap about how super is invested was higher among gen Z and women, at 43 per cent. Jessica Irvine, the bank's personal finance expert, said people have more confidence in managing their day-to-day finances, but need more assistance to understand retirement options. Echoing her views, Wayne Swan, the former federal treasurer who oversaw the legislation guaranteeing the increase from nine to 12 per cent, told SBS News that more needed to be done to engage Australians with their retirement planning. Swan, now chair of Cbus, an industry super fund, said: "I think that all superannuation funds acknowledge and do their best to achieve [that], and there's always more that can be done." What is happening with superannuation? Thirty-four years ago, former prime minister Paul Keating shared his vision of an Australian future that included a 12 per cent target for compulsory super contributions. Now, he said, that system "finally matures". The superannuation guarantee has risen since 2012 to reach 12 per cent. In a statement to mark the 1 July increase to 12 per cent, Keating said it "will guarantee personal super accumulations in excess of $3 million at retirement" for someone entering the workforce today. "Superannuation, like Medicare, is now an Australian community standard, binding the whole population as a national economic family, with each person having a place," he said. How did we get here? Superannuation in Australia stretches back to the early 20th century, but there were no attempts to institutionalise universal compulsory contributions before the mid-1980s. In 1985, the Australian Council of Trade Unions, with the support of the then-Hawke government, presented a National Wage Case to the Conciliation and Arbitration Commission about a 3 per cent compulsory contribution for all Australian workers. The tribunal sided with the union in 1986 but ruled it as optional — subject to agreement between employers and employees. Five years later, in Keating's final federal budget as treasurer, the 3 per cent superannuation guarantee levy was made compulsory. It came into effect the following year, when Keating was prime minister, with the introduction of a superannuation guarantee charge to penalise employers who don't meet their contribution obligations. The mandatory rate then gradually increased to 9 per cent by 2002. It was supposed to reach 12 per cent by 2000, but, under the Howard government, there were no further increases until 1 July 2013. In 2010, two years after the Global Financial Crisis and in response to the findings of the Henry Tax Review, then-treasurer Swan unveiled a plan to incrementally lift the superannuation guarantee levy to 12 per cent. He said it would increase by 0.5 per cent each year between 2013 and 2019. In 2010, then-treasurer Wayne Swan (pictured right) announced a plan to gradually increase the superannuation guarantee levy from 9 per cent to 12 per cent. Source: AAP / Alan Porritt But two months after it rose to 9.25 per cent in 2013, Tony Abbott stormed to a landslide election victory — and followed through on an election promise to delay increases to the guarantee due to cost pressures on small businesses. The government failed to legislate the delay the following year, and the rate was lifted to 9.5 per cent — a level it remained at for seven years. It wasn't until Australia was in the midst of the COVID-19 pandemic that the incremental increases began. Starting in 2021, it rose by 0.5 per cent each year. LISTEN TO SBS News 30/06/2025 08:22 English The 12 per cent milestone Australia's superannuation system now manages over $4 trillion in assets, ranking as the fourth-largest pension market in the world. The 12 per cent milestone is expected to propel Australia to second place within a decade — just behind the United States — despite its relatively small population. Swan said the superannuation guarantee levy not only delivers a secure retirement for all Australians, but "fundamentally alters the distribution of wealth in our community". "It gives access to growth assets to everyone in the community. From a building worker through to a professional in the office tower, everyone in Australia gets to own a piece of the wealth of this great country in a way that's never before been possible," he said. Swan said he's "absolutely proud to have been part of this story". "I always think of those pioneers, particularly the unionists, who fought to establish this scheme 40 years ago. What it really shows is that ordinary working people can effect change in a society like ours," he said. "What visionaries they were, and what they have done to make our country not only a bigger and more successful economy, but a fairer one as well." What is a 'comfortable retirement'? Swan said while the six-year delay in achieving a 12 per cent increase came at a cost to Australian superannuation balances, the benefits are greater from having finally reached that milestone. "For someone who's, say, 30 years old now, it's going to mean an extra $130,000 in their retirement," he said. That follows recent modelling by the Association of Superannuation Funds of Australia (ASFA). The super peak body's retirement standard for June 2025 projects a 30-year-old today on the median wage of $75,000 and a $30,000 super balance would witness that figure rise to $610,000 by the retirement age of 67. This amount exceeds ASFA's estimate of the $595,000 needed to afford a comfortable retirement for singles and $690,000 for couples. ASFA defines a 'comfortable' retirement as someone who owns their home outright, is in good health, can afford top-level private health insurance, has a good car, and engages in a range of leisure and recreational activities, including taking one domestic trip a year and one international trip every seven years. Business concerns There are concerns that a string of 1 July changes , including the increase to the superannuation guarantee levy, could hit businesses and place further pressure on cash flow. Luke Achterstraat, CEO, Council of Small Business Organisations Australia, said: "The increase of the superannuation guarantee comes at a time when award rates have also increased 3.5 per cent, national productivity is in decline, and payroll tax and workers' compensation insurance will also increase." There are concerns that an increase to the superannuation guarantee levy and other changes that took effect on 1 July could negatively impact small businesses and further pressure their cash flow. Source: AAP "This puts small businesses between a rock and a hard place, needing to either absorb or pass on these costs to consumers," Achterstraat said. Beyond 12 per cent: Where to from here? The 0.5 per cent increase to 12 per cent is the last one legislated by the Australian government. However, with life expectancy improving, would we need more in our nest egg, and is there a case for raising the superannuation guarantee even further? "I think there's going to be a debate about whether we need to go above 12 per cent," Swan said. "I think 12 per cent can certainly guarantee quite a dignified retirement for all Australians, but that will be a discussion that will be had in the years ahead."
Sydney Morning Herald
29-06-2025
- Business
- Sydney Morning Herald
Donald Trump-induced market chaos won't shred your super balance
First, it's a question of sheer size. The US is simply too big to ignore, and our funds are too big to stay in Australia. The US makes up more than half the world's equity markets by value, so other markets would simply be unable to absorb all the capital if people wanted to move. Australian super funds are also bursting with cash they need to deploy thanks to compulsory super contributions, and they already own more than a quarter of the local sharemarket. But size isn't the only reason the US will probably remain a magnet for super funds. 'The US do probably a better job of turning GDP growth into earnings per share growth, which ultimately is what our members invest in, than most countries around the world.' Cbus chief investment officer Leigh Gavin Another drawcard for big super is US leadership on technology and innovation, including in artificial intelligence, notwithstanding growing competition from China. This is reflected in the eye-popping share prices of the 'magnificent seven' – the giant US tech stocks that have posted huge returns in recent years, even including a more bumpy ride lately. Cbus chief investment officer Leigh Gavin says that even though the US outlook over the next decade is riskier than it was a year ago, he still views the US as 'an amazingly dynamic country with amazingly dynamic and innovative companies'. 'The US do probably a better job of turning GDP growth into earnings per share growth, which ultimately is what our members invest in, than most countries around the world,' Gavin says. This doesn't mean the US will remain quite as dominant in the investment world as it has been. Indeed, there are signs that big investors are keen to spread their bets more widely, including into other regions such as Europe, and other currencies outside the greenback. But throughout the past six months of volatility, there have been few signs super funds are ditching the US in any dramatic way. MLC Asset Management chief investment officer Dan Farmer for example says the fund has been diversifying into Europe because it believes the continent represents better value, but not because the fund believes US exceptionalism is over. 'We spent a bit of time thinking about that question of US exceptionalism because it is a large part of our portfolio and most portfolios,' Farmer says. 'And we've arrived at the conclusion that the US is still an exceptional market for a few reasons – the quality of the businesses in the US. The tech stocks are expensive, yes, but still high-quality businesses.' Loading One thing, Farmer says, that would make the fund really take notice would be a weakening in US institutions such as the Federal Reserve. But although Trump has repeatedly taken potshots at the central bank, Farmer believes its independence is 'still very much intact'. What about geopolitical risk? Are the super giants worried that the many flashpoints in the world – the latest being the Middle East – will have disastrous consequences for markets? Again, big funds are betting that over the long term, geopolitical crises are unlikely to cause lasting damage to markets, unless they inflict a major hit on the world economy. The muted reaction on global markets to the US bombing of Iran is a case in point. Gavin says geopolitical shocks in the past have typically knocked 2 to 10 per cent off share markets (unless they spark a recession). In many cases, markets rebound soon after the initial shock. All of this underlines perhaps the most important lesson from a wild year on markets: staying the course has paid off. Every time there is a market plunge, super funds brace for jittery members to move their money to a safer option such as cash. Given the frequency of scary headlines, it's easy to see why many people get spooked. But the well-known risk of doing this is that you could lock in losses, and miss out on the rebound – which this year was powerful, and took place when Trump paused his tariff plan. With the benefit of hindsight, we now know switching to cash during the 'Liberation Day' chaos would have been a costly mistake. As Trump is still early in his second term, that's worth remembering because it's highly likely his presidency will bring more episodes of volatility for investors. Ross Gittins is on leave.
AU Financial Review
25-06-2025
- Business
- AU Financial Review
Cbus, MLC stand firm on US, home in on double-digit returns
Two of Australia's largest superannuation funds have vowed to maintain their level of exposure to US markets, despite a more volatile and unpredictable White House, as they home in on double-digit returns for the financial year. Industry super giant Cbus, which manages $100 billion in retirement savings for a customer base largely consisting of construction workers, made a return of 9 per cent on its default option over the past 12 months, securing an extra $14,770 for the average Australian's nest egg.
AU Financial Review
30-04-2025
- Business
- AU Financial Review
Inflation steady; $100b fund's Trump plan; Ex-model running for One Nation
Want to get this in your inbox at lunchtime every weekday? Financial Review subscribers can sign up for The Brief newsletter here. Plus start your day with our Before the Bell newsletter and read a full wrap of the day's news in Market Wrap. In today's news, inflation is holding steady, new Cbus chief investment officer Leigh Gavin has a plan for Donald Trump's trade wars, and a former Italian model is running for One Nation.
The Guardian
30-03-2025
- Business
- The Guardian
Super fund took more than 500 days to approve death benefit for grieving widow, Asic says
An unnamed superannuation fund took more than 500 days to approve a death benefit payment to an Indigenous woman grieving the loss of her husband and ignored her concerns about financial hardship and a confusing claims process. The 'distressing' case has been highlighted by the financial regulator as one of many 'poor industry practices' by funds that have had 'devastating impacts' on members experiencing 'deep grief, vulnerability, frustration and genuine suffering'. A 'landmark' report released by the Australian Securities and Investments Commission (Asic) on Monday has made 34 recommendations to overhaul the superannuation sector. The report investigated the conduct of 10 trustees, which are responsible for 38% of all member benefits in Australia. Asic chair, Joe Longo, said the report 'identified a range of issues including excessive delays, poor customer service, and ineffective claims handling procedures'. He called on the industry to 'take ownership of the problems and flex their muscle to fix the failings'. 'At the heart of this issue is leadership that doesn't have a grip on the fund's data, systems and processes – and ultimately it is the customers who suffer for it,' Longo said. 'This kind of disconnect is unacceptable in any area of corporate Australia, but in the superannuation sector it is particularly serious, because super affects everyone from the boardroom to the living room.' Sign up for Guardian Australia's breaking news email A death benefit is the amount of superannuation a person has remaining in their account after they die. This can be transferred to a family member to ensure bills and expenses can be covered. This payment may also include life insurance payments. The review of 10 superannuation funds comes after Asic lodged federal court proceedings alleging Cbus failed to process more than 10,000 claims for death and disability payments within 90 days. More than 6,000 members were forced to wait more than 12 months for payments. Cbus has apologised and promised to overhaul its processes. The 10 reviewed funds include Australian Retirement Trust, Avanteos (Colonial First State), Brighter Super, Commonwealth Superannuation Corporation, Hesta, Hostplus, NM Super (AMP), Nulis (MLC), Rest and UniSuper. The report found some funds had performed better than others, but all needed to improve. The review found communication with First Nations claimant was 'often not culturally sensitive' and that their death benefits often took longer to deliver. The report highlighted the case of a First Nations woman who lodged a claim for a death benefit after her husband died. He had a death benefit of around $100,000. According to Asic, she repeatedly told an unnamed fund she was suffering financial distress and struggling to navigate the claims process. 'The trustee did not respond to the wife's concerns about financial hardship,' the Asic report said. The woman had already raised concerns about lacking 'standard identification documents for her deceased husband'. Asic allege the fund 'took more than a year to offer the wife alternative identification options'. Sign up to Breaking News Australia Get the most important news as it breaks after newsletter promotion 'The trustee finally decided to pay the wife after more than 500 days,' the report said. 'However, as of the date we collected the claim file, the wife still had not received payment.' Asic commissioner Simone Constant said 'grieving Australians should not have to suffer further stress because of the failure of superannuation trustees to approach claims in a timely, clear, and respectful manner'. 'Many of the complaints we read were distressing. We saw deep grief, vulnerability, frustration and genuine suffering,' Constant said. 'The money from a death benefit can make a huge difference and each day a trustee delays that payment causes real harm to families. Trustees need to do better.' The 10 superannuation funds examined by Asic are yet to respond to the regulator's findings but have previously outlined measures to improve their performance. In November, several of the funds mentioned in the Asic report said they had overhauled their internal processes to improve customer outcomes.
