From 1st July 2013, the legislated rules around the Superannuation Guarantee level will start with an increase of your superannuation contribution from 9% to 9.25%. This is the first step towards a 12% contribution rate that has been legislated to occur by 2019.
These changes are going to effect every working person in Australia in more than a few ways. Firstly, the positive news is that as a result of these changes, most Australians will see an increase in their retirement savings – especially those just entering the workforce now. For those that are nearing retirement, it will make a small change – however it’s those just starting work now that are going to experience the longest period of time at 12%, which is an increase of 33%.
Employers are going to have to start paying more into superannuation. Superannuation is seen by many employers as a cost and burden, however in reality it is just part of the cost of hiring people and should be factored into forward budgets and expense expectations. The increases of superannuation will come from the company, and should not be seen as a compulsory salary sacrifice that comes out of the salary or wages.
An effect not much discussed will be how this cost is managed – and what most analysts are expecting to see is a small slow down in wage increases over the next few years. Should companies be happy to see a 3% wage increase, it’s entirely possible that 2.75% will be on the table come the next financial year to take into consideration the increase in SG contributions.
With more money going into the superannuation system than ever, it’s becoming more and more important that superannuation members take stock of their plans for retirement and retirement savings. This includes taking a good look at your superannuation and ensuring that it is working for you. The essential ingredient in getting your superannuation to work is to first understand the concept of super and its various forms. Once you have a thorough understanding of superannuation and its benefits, then you can take into context your own financial circumstances and start to build a plan on how to make the most of savings. Most people don’t spend sufficient on this, and the poor returns that have disappointed many investors is one of the results of this.