Millions of multiple super accounts erode savings
One of the simplest ways to make your retirement savings more efficient and less costly is to get rid of needless multiple super accounts.
The vast majority of super fund members with multiple accounts unnecessarily pay multiple sets of fund administration fees and insurance premiums. These extra costs compound over time to eat away at retirement savings.
Further, members with multiple super accounts may have difficulty keeping track of how their retirement savings are invested, their asset allocations, and whether their returns are satisfactory. This can lead to sacrificing returns year after year in a poorly performing fund. Lost super accounts can often mean lost returns.
Yet many of us have more super accounts than credit cards. It may seem hard to believe but some individuals are members of six or more super funds.
Of 14.8 million Australians who were members of a super fund at June 2017, the tax office reports that 40 per cent had more than one super account. More than 28 million super accounts exist – almost double the number of Australians with super.
And 6.3 million super accounts with a total value of almost $18 billion were classified as "lost" or "inactive". These accounts are held by the tax office (earning interest) or by super funds, depending upon the circumstances.
While 60 per cent of fund members held one account, 25 per cent had two super accounts. One per cent (63,000 members) had six or more.
This tax office data suggests that many young members begin collecting multiple fund memberships shortly after first joining the workforce, often working in a succession of part-time or full-time jobs. A common trap is to join a new default super fund whenever taking a new job.
Those working in the gig society and holding a portfolio of part-time jobs would often have multiple super accounts.
The numbers of members with multiple accounts tends to markedly increase as members move from job to job during their typically long careers, peaking at 48.17 per cent of members in the 41 to 45 age group. Having three or more super accounts is not uncommon, mostly for members in their mid-careers.
Fortunately, the proportion of members with more than one accounts begins to reduce as they enter their fifties, falling to one third of members age 61-65 and down to under 18 per cent of members age 66 or more.
As actuaries and consultants Rice Warner point out in a recent commentary, some individuals have a need for two super accounts – typically for insurance coverage or because they are unable to combine a defined benefit account with an accumulation account. But this would not explain why millions of multiple accounts exist.
Certainly, the consolidation of your multiple super accounts is unlikely to dramatically improve your super savings. Yet as Rice Warner comments: "Recovering lost super can improve retirement savings bit by bit".
The tax office's website has a useful feature, Keeping track of your super, which includes a useful video about how to find your multiple super accounts and how to get rid of excess accounts using the MyGov website. ASIC's consumer website MoneySmart also useful tips in an article, Consolidating super funds.
Written by Robin Bowerman
Head of Market Strategy and Communications at Vanguard.
09 March 2018
vanguardinvestments.com.au
Latest Newsletters
Hot Issues
- SMSF assets reach record levels amid share market rally
- Many Australians have a fear of running out
- How to get into the retirement comfort zone
- NALE bill passed by parliament
- Compliance focus impacts wind-ups
- LRBA interest rates increase for 2025
- Income-free areas set to increase from 1 July
- Most Spoken Languages in the World
- Middle-to-higher incomes boosting SMSF growth
- Investment and economic outlook, May 2024
- Transitioning into retirement: What you should know
- Plan now to take advantage of stage 3 tax cuts
- Deeming freeze a win for Age Pensioners
- Downsizer contributions can be time critical
- The superannuation changes from 1 July
- The Deadliest pandemics in History
- Winners & Losers
- Budget breakdown – Federal Government Analysis
- Federal Budget 2024
- Getting to a higher level of financial literacy in Australia
- What is the future of advice and how far off is superannuation 2.0?
- Investment and economic outlook, April 2024
- Australia’s debt service ratio ‘extraordinary’: CBA
- Connecting an adviser with your children
- ACCC scam report
- The Shortest-reigning Monarchs in History
- ATO warns trustees about increasing crypto scams
- Aged care report goes to the heart of Australia’s tax debate
- Removed super no longer protected from creditors: court
- ATO investigating 16.5k SMSFs over valuation compliance
- The 2025 Financial Year Tax & Super Changes You Need to Know!
- Investment and economic outlook, March 2024
Article archive
- April - June 2024
- January - March 2024
- October - December 2023
- July - September 2023
- April - June 2023
- January - March 2023
- October - December 2022
- July - September 2022
- April - June 2022
- January - March 2022
- October - December 2021
- July - September 2021
- April - June 2021
- January - March 2021
- October - December 2020
- July - September 2020
- April - June 2020
- January - March 2020
- October - December 2019
- July - September 2019
- April - June 2019
- January - March 2019
- October - December 2018
- July - September 2018
- April - June 2018
- January - March 2018
- October - December 2017
- July - September 2017
- April - June 2017
- January - March 2017
- October - December 2016
- July - September 2016
- April - June 2016
- January - March 2016
- October - December 2015
- July - September 2015
- April - June 2015
April - June 2018 archive
- Assess your retirement financial resources
- Cryptocurrency audits tipped to increase this EOFY
- Time to check your risk exposure?
- Some general interest stats on SMSFs
- Survey reveals strong opposition to retirement system changes
- Check trust deed to protect super in estate planning
- Australia by numbers – Update
- Federal Budget 2018 – Overview
- Your Budget
- 4 components of our 2018 Federal Budget
- Tools to help you manage your financial position are available on our site.
- New rules capture SMSFs trading big with cryptocurrency
- Common EOFY slip-ups flagged for SMSFs
- Beware residency rules if moving overseas
- 99 pct of SMSFs missing global opportunities
- How to plan for a better retirement
- Australia by numbers - Update
- Determine your retirement goals
- ATO issues update on cryptocurrency compliance traps
- How likely is a global trade war?
- Gig economy spike prompts calls for super policy changes
- Australia's vital statistics
- What your age should say about your super
- Downsizing requires holistic tax planning
- Millions of multiple super accounts erode savings