A UNSW Business School academic says students and young people need to start caring more about their superannuation entitlements.
“Superannuation is a natural partner of your wage income. So, if you’re at a university and also earning a part-time wage then it’s important,” Professor John Piggott said.
Currently, employers have a legal obligation to pay 9.5% of a wage or earnings into a super fund.
“Although the amount seems small, it’s a start. As you progress through your career, the most powerful force that will augment your superannuation accumulation is compound interest. So, starting early means compound interest has a better chance,” Professor Piggott said.
The Scientia Professor pointed to the lack of education and financial literacy among students and young people when it comes to labour market rights.
“It would not hurt to have universities play a role in informing students. First about their entitlements in the workplace - and one of those entitlements would be super - maybe explain what the longer term implications of superannuation might be,” he said.
Data released by the Australian Tax Office (ATO) revealed $17.5bn in unclaimed super across 6.2 million accounts.
Dr Piggott, who has a longstanding interest in retirement and pension economics and finance, said getting young people to be aware of the entitlement was an important piece of the process.
“We have many strengths in our superannuation (system) but I think one of the challenges it confronts is that it is difficult to get members to engage with it through the course of their lives and through their workforce experience,” Professor Piggott said.
The Director of the ARC Centre of Excellence in Population Ageing Research (CEPAR) has encouraged young Australians to start contributing to their superannuation funds as soon as possible.
“If you start early, then you will probably retain that habit and that can be very beneficial - in terms of the decision making that you gradually learn to undertake and to refine through your work life,” he said.
Professor Piggott, who was a member of the Henry Tax Review Panel and the Ministerial Superannuation Advisory Committee, said the two most important assets that people hold (at retirement), are the principal residence or owner-occupied house and superannuation.
According to the UNSW academic, in the past people have gained a lot of capital, particularly through investment property and to a lesser extent share portfolios and other financial assets.
“I see those as add-ons, if you do have those opportunities, by all means, take advantage of it but begin with a superannuation and owner-occupied home,” Professor Piggott explained.
The UNSW Business School academic and CEPAR Director had the following advice for young employees:
- Keep your mind on your super (as the accumulation of compound interest can be substantial).
- Make sure you receive your entitlements.
- Be conscious of what is happening to your entitlements when you get it – how much is going to life insurance, etc.