super in australia

Super often gets bad press. That might be from media pundits who expect rolled gold returns year in and year out despite market ups and downs. Or it could come from account holders themselves who find the need to understand the extensive rules very challenging.

That’s understandable, but this is why it is useful to take a step back and consider the many aspects of the Australian superannuation system that make it the envy of most developed nations across the globe.

Compulsory super was introduced by the Keating Government in 1992 with initial employer contributions of 3%.  Whilst some in industry predicted that this ‘largesse’ would cause the sky to fall in, it didn’t. Compulsory contributions (now known as the Super Guarantee or SG) have reached 11.5% as of 1 July this year. Consequently, a majority of Australians have a significant nest egg as they head into retirement. Those aged between 65 and 69, hold median amounts of $213,986 for men and $201,233 for women.

The many benefits of super

There’s a lot to like about this system. Firstly, because it is compulsory, if you work, your employer must pay this money into your nominated account where it will compound across the years to become a much larger amount than the sum of the contributions.

It’s also universal, so all workers in Australia must have these contributions made on their behalf at least quarterly. (with the exception of those who are self-employed and can choose to opt out). You can also salary sacrifice extra amounts or make voluntary contributions up to the cap of $30,000.

Investing in super is also fairly low cost, with most funds charging very modest fees. And this is where the magic kicks in.  I remember Garry Weaven, an influential figure in the growth of the superannuation industry, saying one of the great things about superannuation is that it allows ordinary Australians to invest as if they were billionaires.  They can benefit from the expertise of highly experienced funds managers and get access to deals and major infrastructure projects a typical small investor never would.  Fund results for the most recent financial year reflect this performance capability.

Another strong feature of the Australian super system is the tax effectiveness of these savings. Earnings in accumulation accounts are taxed at just 15% and when these funds are moved into pension (decumulation) accounts, there is no tax payable on the earnings. 

Small amounts of super savings also go a long way. For instance, if you enter retirement at age 67 with just half the median super (say, about $100,000), this will enable you to top up a full Age Pension (singles $29,024 or couples combined $43,753 ) by another $5,000 for the rest of your life, depending on how it is invested. This is a high proportion of the base pension rate which may mean the difference between a very restricted lifestyle and one with a higher level of comfort and choice.

Why don’t we seem to care?

Given all these different benefits of super, why don’t more Australians engage more deeply with these savings until they are virtually forced to? This is an issue both the Federal Government and major super funds grapple with. Why do so few members bother to open their annual account statements, let alone read the information within? What’s the turnoff?

There are a few reasons why this is the case and the following deserve some scrutiny.

Firstly, given the compulsory nature of super from day one of your work life, you don’t actually have to do anything. It’s up to your employer to make the contributions so if you do not manage your super at all over the years, you won’t get into trouble for this. But this lost opportunity will probably reduce your retirement income. Even small amounts of voluntary contributions help. So does understanding your investment setting (is it the most appropriate for your life stage?) and choosing to deselect insurance within the fund if it’s not needed in your life at this time.


Complexity is another major barrier. Over the years, successive Australian governments have tried hard to update and amend super laws to suit the perceived needs of superannuants. Regardless of whether these changes have been beneficial or not, the result is that super now has so many rules attached, it can take a deep knowledge of finance, investing and tax to make the most of many super nest eggs. The rules carry equally confusing names (‘bring forward’, ‘carry forward’, ‘downsizer’, concessional and non concessional caps,‘transfer balance caps’ etc) and this can exacerbate the confusion.

Similarly, the way that your super pension can work in tandem with the Age Pension remains a mystery to many. This is where using calculators such as Retirement Essentials Age Pension Entitlements Calculator that automatically takes eligibility, compounding and inflation into account for long-term retirement journeys.

Is there an easier way?

It’s impossible to know what you don’t know.

But recognising this enables most of us to ask and receive answers to specific questions about super at the most useful time. Knowing that you don’t know everything about super thus becomes an attribute because by seeking information and advice, you will avoid mistakes that may have cost you dearly.

One such case springs to mind. It’s the story of Natalie and Vijay who benefitted from better understanding of the differing super rules for couples when applying for an Age Pension.

Frequently Asked Questions

Here are some of the most common questions our advisers are asked about super. The answers are not quite as straightforward as you may think. That’s because every retirement is different and how and when you apply the many rules of super can lead to very different outcomes.

  • When can I access my superannuation?
  • How do I maximise my Age Pension when I also have super?
  • Should I use my super to pay off my mortgage?
  • How much should I draw down from my super?
  • How can I make my super last longer?
  • Should I withdraw all my super?
  • How should I invest my super?
  • Are there any tips and tricks that could get me more Age Pension or other entitlements?
  • Can I contribute to super when I have retired?
  • What are the tax advantages of super when I have retired?

Understanding your options

After the Age Pension, superannuation is the most important source of income in retirement for most Australians.  There are many things you can do with your super that can improve your income in retirement.  It can help to have access to someone who knows the rules, tips and tricks.  Not everyone wants to use online tools to answer these important questions. A personal consultation will help you answer one or two of the most common questions about super in retirement, so that you can assess the options to make your super work better for you.

We charge $375 (inc. GST) for a 55 minute video consultation.

You might also like to undertake a guided review of your retirement income possibilities.

Retirement Forecasting helps you to develop a safe spending plan and how your assets and income could look in the future under a couple of different scenarios.

Do you find super too confusing?
Or do you manage your own super savings quite happily?