The total contribution of superannuation towards Australians’ net wealth is on the increase with research finding that younger people are engaging more with their super than ever before.
Greater awareness of retirement income shortfalls and the GFC experience are driving factors, with the Self-Managed Super Fund Professionals’ Association of Australia (SPAA) predicting that the trend will continue.
A recent Australian Taxation Office (ATO) report – Self Managed Super Funds: a Statistical Overview – found that while SMSF members still tend to be older than the non-SMSF sector, the SMSF model is increasingly attracting younger investors.
Some 11 per cent of new SMSF members were under the age of 35 in the June 2010 quarter compared to just over 5 per cent for the whole SMSF member population, according to the report.
“These figures indicate that younger Australians are becoming increasingly knowledgeable about and interested in the performance, management and control of their superannuation savings,” says Andrea Slattery, SPAA CEO.
“This is understandable given the big dip in many superannuation fund balances as a result of the GFC and an unsteady global economic recovery.”
According to Roy Morgan research, the largest component of household net wealth continues to be equity in owner occupied homes, which accounts for 48.4 per cent.
Between the twelve months to June 2007 and the same period to June 2011, the proportion of net wealth in superannuation linked funds and investments rose from 26.3 per cent to 27 per cent, while non-superannuation investments such as managed funds decreased over the same time period.
In the twelve months to June 2011, the research found, these non-superannuation investments experienced an increase for the first time in over three years, due mainly to a growth in bank deposits as a result of market uncertainty.
However this experience may ultimately lead to a more cautious, savvy generation of investors.
“Given the GFC experience and increasing public awareness of the very serious risk of a retirement income shortfall, younger Australians are making their superannuation more of a priority than previous generations,” says Slattery.
“While younger people may have other competing priorities for saving, including children and purchasing a home, they are increasingly also concerned about saving for retirement.
“The Government’s proposed Superannuation Guarantee (SG) increase from 9 per cent to 12 per cent will help ensure this happens.”
Even with the SG increase, SPAA continues to urge the government to reverse the 50 per cent reduction in the concessional contribution cap, which was announced in the 2009 Federal Budget.
“The much lower cap continues to deny many thousands of Australians, who may have had broken work patterns, the ability to catch up their retirement savings during a time when they may be better able to do so,” says Slattery.
From memory, I think studies show the lowest savings rates are for those between 30-50 years of age, when children and mortgages tend to swallow any excess cash. Savings rates pick up again after 50, when people start to think more about preparing for their retirement. I think it is actually Gen Y who have the best savings rate across all categories, although the dollar amount is low. Gen Y might be the super savers, but not Gen X.