Your super is about to grow even faster – and you don’t have to do a thing

Watching his parents prepare for retirement by checking their superannuation balance and make extra contributions has taught Jacob Jackson about the importance of preparing for retirement early.

He might still be early on in his career, but the 29-year-old senior account manager continues to keep a close eye on his superannuation payments. Jackson routinely checks his payslip to make sure his super contribution has been paid, and checks his fund balance every couple of months.

He admits he’s more engaged with his super than others, which is why he knows from July 1 his year, his super balance will start to grow even faster thanks to the new Payday Super changes coming into effect.

Dubbed one of the most positive reforms for working Australians in decades, the changes require employers to pay super at the same time as wages. It’s a major shift from the current model that allows super to be paid quarterly, and it will boost employee retirement savings as they will earn interest on their super sooner.

It will also be easier to track super payments and reduce the potential for employers to delay payments. The legislation requires employers to make sure contributions land in the employee’s fund within seven business days of pay day – whether that’s weekly, fortnightly or monthly – with non-compliance to trigger costly penalties.

The change means at least 4.5 million workers will get more frequent super payments without having to do anything at all. Young workers like Jackson stand to benefit the most, with decades for more frequent compounding to work in their favour.

‘The problem with quarterly payments is that you’re essentially giving your employer an interest-free loan for up to three months.’

Jacob Jackson

“I’ve been lucky enough for my parents to show me how super works as we talk about their retirement down the track, and I do stash some extra into my super fund when I can manage it,” Jackson says.

A male aged between 25 and 29 years of age should have around $27,000 in their superannuation fund. Jackson, who has been working since he was about 14-year-old when he started out part-time in a pizza shop, says his super is on track.

“The problem with quarterly payments is that you’re essentially giving your employer an interest-free loan for up to three months. Multiply that across a career, and it adds up to thousands in lost earnings.”

The shift to Payday Super comes after the benchmark guide to how much money you need to live in retirement rose last year to $35,503 a year for singles hoping for a modest lifestyle, or $50,055 a year for renters.

The lump sum needed by retirement age to fund a comfortable retirement if you’re single is $630,000, or $730,000 for couples. But the super industry is battling against a largely ignorant workforce when it comes to their nest eggs.

Most (80 per cent) of employees have never heard of Payday Super, while six in 10 employers are similarly unaware about the change, data from payroll software provider Employment Hero shows.

Less than half of workers actively engaged with their super fund to some extent over the past year, says Employment Hero’s general manager of super Rob Dunn.

“Payday Super is one of the most positive reforms for working Australians in decades. More frequent contributions mean better visibility, fewer lost accounts and ultimately, healthier retirement savings for millions of people,” Dunn says.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their personal circumstances before making any financial decisions.

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