Bitesize: Superannuation 101: Everything You Need to Know About Planning for Retirement

Bryce: [00:00:06] Welcome to bite sized on Get Started Investing. In this series, we feature some of our favourite lessons, quotes and moments from the podcast. If you'd like to listen to the full episode, we've included the link in the show. But let's start at the top price. Let's establish what we're talking about here. 

Alec: [00:00:24] We're talking about superannuation, Ren and much like investing. I think, you know, there is no perfect way to manage your superannuation for a lot of people. It is in that forgotten basket. I wouldn't say too hard a basket, but the important thing is that you think about it and you deliberate about it. You know, the ATO website says in nice, big, bold writing at the top of the website that your super is your future. The superannuation choices you make today will help shape your lifestyle in retirement. Now I know we're early thirties, late twenties for you, Ren, and for some people who are just sort of very early twenties and starting full time work and you know, starting to accumulate superannuation, thinking about optimising it over a 60 year period is often, you know, far from from I guess the important things to be thinking about. But we really want to make it clear that it should be. So you start getting super the moment that you start working. So paying attention to it early will have some serious benefits over the long term. So we've got some stats here. And if you want to run through just to sort of highlight some of the challenges and I guess surprising figures that are coming from the superannuation industry at the moment. 

Bryce: [00:01:41] So the Government recently did a report well, they did a report as part of passing a suite of legislation around super reporting and stuff like that. And I don't know if you've had a play on some of the new tools like the ATO's your super comparison tool. 

Alec: [00:01:59] I don't know. 

Bryce: [00:02:00] It's, it's worth having, it's worth having a look. It's pretty good. It's pretty it's pretty clear about fees. It's clear about performance that I get in my head. But as part of this report, there were some pretty stark numbers that came out in terms of the state of Australia's superannuation industry and like let's, let's not get it twisted here. Like there are plenty of great super funds, but there is a pocket of the industry that is underperforming and it would be a real shame if you didn't even know that you were in that underperforming pocket. So if you number off the top $3.1 trillion in Australian superannuation assets, that number grew at 13.9% between March 2020 and March 2021. So a massive pool of money and very quickly growing. And you know, you can see the impact that this pool of money is having. I'm pretty sure it was a bunch of super funds and some other companies that just put the bid in for Sydney Airport. Correct me if I'm wrong. 

Alec: [00:03:07] Bryce Yes. 

Bryce: [00:03:08] Yeah, yeah. 

Alec: [00:03:09] Q Super. 

Bryce: [00:03:10] You hear about Canadian pension funds just in a desperate search for assets around the world like Australian super funds are going to be buying a lot of very important assets because there's just such a pool of money there. So it's a big pool of money. The next thing is there's a lot in fees and costs $30 billion a year in fees and other costs. You know, our number one rule here at Equity Mates is we hate fees. You know, obviously, you're going to have to pay fees as part of your super. But it's important to know who you're paying, why you're paying it, and you're not paying too much. But then you get to the really, I guess, worrying numbers in terms of underperformance and duplicate super accounts. So there is $100 billion worth of Australians money in underperforming super products. Now that's from this Government report and that's that's pretty that's pretty stark. And that 100 billion is spread across 3 million accounts, super accounts that are again in underperforming super products. So pretty, pretty stark numbers there. And then 27% of Australians have duplicate or have more than one super fund account. So that means they may be paying multiple sets of face, may be paying multiple sets of costs for things like income protection insurance or disability insurance that sometimes are included in your super fund. So there's a real reason for Australians generally to wake up or to need to wake up and think about their super. But then if you go to our age bracket, 25 to 34, the numbers become even clearer that Australians just aren't thinking about their super. Now these numbers are from research from the centre. For International finance and regulation that surveyed a number of Australians between 25 and 34 years old. Bryce Tell us what people our age think about far. 

Alec: [00:05:22] Well, I mean, if it's based on the conversation we have with our mates, it's not a lot. They're not thinking about super a lot. So less than one third. This is from the report. Not this is not just amongst our mates, but, you know, less than one third of 25 to 34 year olds here in Australia actually read their annual superannuation statements. And those statements are the important things that tell you how much money you've actually made in your superannuation, how much money your employer has put in, and gives you a bit of a rundown on the types of investments that you've got in there. 4/5 rarely or never think about making changes to their investment options, which is something that we'll talk about in a little bit. Nearly two thirds can't name the age at which they can start accessing their superannuation funds, and only 35% think of themselves as well-informed on matters regarding superannuation. So yes, we have a slight bias with this age group because we are in that age group and I'm sure for a lot of people listening who might be a bit later on in life, superannuation is certainly something that they would be thinking about. But I think the good thing then is that, you know, you don't want to be on the wrong side of these statistics. The good news is that it is absolutely in your control to do something about it and to optimise your superannuation no matter what approach you take so that you can actually start, I guess having a super fund that is more aligned with your age where you are in life and the goals that you have later on down the track. When it comes to retirement, if you enjoyed that bite size, you'll find a link to the full episode. In the show.