Results of a landmark Productivity Commission review
The release of findings from a landmark Productivity Commission review affirmed the alarming indifference adopted by Australian workers towards their superannuation. Presently, Australia’s superannuation system has accumulated over $2 trillion in assets. Accordingly, it is a system that holds central importance to the Australian economy, and the funding of retirement incomes.
The outcomes of the Commission’s report indicate that a shake up to the superannuation industry is imminent, with projected savings for Australian workers up to $407,000. Findings indicate that this savings potential is available via transitioning from underperforming funds, leveraging choice to self-select a super fund aligned with financial planning goals; plus, consolidation of superannuation within one fund to avoid payment of multiple account fees.
Superannuation is key to financial wellbeing, dignity and security as Australian workers transition out of the workforce and into retirement. Moreover, employee investment towards their superannuation fund for each day worked, highlights that Australian employees work daily for their super; therefore, it makes sense to ensure that their super works for them.
Additionally pertinent is that superannuation is typically an individual’s second largest asset after the family home. That’s why it is even more important that employees make an active choice in relation to their superannuation and, subsequently, retirement planning.
The Government’s Productivity Commission Review noted that financial loss in superannuation savings was directly impacted by consumer apathy, leading to a willingness to accept an employer’s default super fund without due consideration, thereby limiting choice in self-selecting an optimal super fund. In doing so, employees typically pay zero attention to fees, how the fund invests their money, or even actual performance.
Superannuation is confusing
There are of course a number of reasons for this, least of which is that superannuation is generally perceived to be confusing and difficult to understand. There’s also a lot of misinformation. Many Australians believe that their employer is responsible for looking after their super investments (so they don’t have to) because contributions are deducted from their pay and reported on payslips.
In addition, superannuation guarantee (SG) terminology has led many Australians to believe that superannuation provides them with a “guaranteed” retirement income; again, so they don’t need to worry about it. Added to this misinformation is the fact that most people can’t access their superannuation until they’re between 55-60 years of age; thus, people choose to ignore it resulting from a lack of a sense of urgency or immediacy in need. In particular, Millennials are a representative cohort for whom superannuation is typically deprioritised amongst the list of considerations related to their financial planning. Additionally, employees often do not act to remediate losses in their superannuation until it’s too late to effect any real change.
If you don’t believe me, ask a few colleagues about their super:
- Do they know what their super balance is?
- How do they rate the information they receive from their super fund?
- How interested are they in getting more actively involved in their super?
You’ll probably find few know their balance, and fewer still have any interest in getting more actively involved.
Second largest asset
As an employer, it can be challenging to provide adequate education to your employees to inspire action related to their superannuation. In spite of this, it is critical that employers, and HR professionals in particular, utilise their unique position within their organisation to wield positive influence over the future financial wellbeing of their employees post-retirement. In turn, employers are uniquely positioned to shape the Australian economic landscape, whilst creating a more prosperous future for generations to come.
With our aging population, and ongoing reforms to government–funded age pension, it’s likely that most of your workforce will have to rely on their retirement savings to fund their lifestyle when they leave the workforce.
As an employer, superannuation is a costly benefit and a highly-regulated component of your employee benefits package, so it’s important for you to ensure your employees can make the most of it. Repositioning superannuation as an enhancement to your employee value proposition, not only enables your organisation to remain competitive, but provides invaluable benefit to the financial wellbeing and dignity of your employees. It’s a win-win for both the employer and the employee.
Better quality information
A great place to start is by providing better quality information and helping your employees through the delivery of financial literacy programs. Scrutinise the communications collateral produced by the super funds you endorse to ascertain just how wide the communication gap is.
Your goal is to enhance the engagement process, and educate your people with great content that is simple and easy to understand so that they can take more control over their financial wellbeing. Use webinars and seminars to share knowledge to get your people motivated to take control and ensure that their superannuation strategy will adequately support them.
Flare Financial Wellbeing Services
Flare partners with organisations to provide a suite of Financial Wellbeing services aimed at enhancing financial outcomes for employees within an organisation. By providing essential financial education programmes, employees are empowered to make informed choices in relation to financial decisions that affect their wellbeing now, and into the future.
Book a demo today, and start your employees on a path to financial wellness.
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