Over 930,000 working Australians will contribute nothing to their superannuation balance this year. This means one in 11 Australian workers are not saving for their retirement through super, according to Mercer, a leading global human resources consultancy.
This represents a A$4bn ($2.9bn) hole in annual super savings and a potential A$145bn deficit across their working life.
Mercer’s ‘Australia’s Unsupered’ report also reveals that 43% or 397,900 of the “unsupered” workers were salaried staff eligible for the 9.% compulsory superannuation guarantee paid by employers, while the remaining 57% were self-employed.
In estimating the level of unsupered in Australia, Mercer used a 2% sample file of tax and superannuation data from the Australian Taxation Office (ATO) 2015-16 records.
Mercer Australia Industry Fund and Public Sector Leader Jo-Anne Bloch said the report highlighted major problems with the compulsory superannuation scheme, saying that it had failed to keep pace with the changing workplace and enforce legislation requiring employers to pay workers their legal entitlements.
The Mercer report says that as the administrator of Australia’s payroll and superannuation system, the ATO has a significant role to play in improving superannuation coverage through more stringent oversight of employers legally obliged to pay workers the minimum superannuation rate.
The ATO has had an ongoing audit programme in place for some time with the aim of identifying and resolving outstanding super payments. Recently, the ATO has also introduced a number of measures to help ensure better compliance of super payments by employers.
A new reporting mechanism for APRA-regulated funds, known as the Member Accounts Transaction Service (MATS), was recently introduced. Contributions for each member will be recorded and reported to the ATO at the time they occur rather than annually. The ATO has also made changes to improve employees’ visibility regarding their entitlements and payments, through online services. For each quarter, members of APRA-regulated funds will be able to see super payments made into their super fund, which will assist with possible self-identification of non-payments.
To resolve the unsupered problem, the report suggests:
- the government enrols the self-employed inside the super system. Currently, Australia excludes the self-employed from its mandatory system on the grounds that they need the flexibility to invest in their businesses and that these will provide a form of financial security for retirement.
- all funds should alert members if and when regular contributions have ceased;
- funds have a role to play in educating workers on the ins and outs of superannuation;
- funds could be servicing the Unsupered more effectively by segmenting their members by ‘work style’ rather than life stage.