The superannuation guarantee (SG) makes up one of the three ‘pillars’ of the Australian retirement income system. The other two pillars are considered as the age pension and voluntary superannuation. The contributions in 2009 totalled $71 billion but amidst that amount lie billions of dollars being wasted by their respective superannuation owners.
The key to you saving more money and avoiding additional costs sits within merging your superannuation accounts. This exercise can take as little as five minutes to do and in return it could end up saving you thousands of dollars in fees each year.
There is one way to determine if you could save hundreds, if not thousands of dollars each year in superannuation fees. Simply ask yourself if you have changed jobs a few times over the years? If the answer is yes then the likelihood is that you will have more than one superannuation account, each set up under a different employer. The Australian Taxation Office (ATO) last year released figures stating that 45% of working Australians have more than a single superannuation account meaning that just under half of the population could be saving money every year.
On average, most superannuation account holders will pay around $532 per year in fees per account. If you multiply this amount per year by the number of accounts you hold, and then multiply that by the total number of years you will work during your life, that figure starts to add up pretty quickly. For example, let's say I've had four jobs during my working life spanning 40 years. Thus, if I have a superannuation account for each employer that I was with, then the average fees I would have paid over that period across all accounts comes to over $85,000. If, on the other hand, I'd only ever worked for one company during those 40 years, that figure what have amounted to $22, 280. This is why consolidating your accounts into one can save you thousands over the course of your working life.
It’s become common practice for people starting new jobs to open a new super account instead of taking their original fund with them. In other scenarios, people may simply forget that they have accounts open and lose track of them either by not updating their contact details or from changing address. Australia still has $5.8 billion worth of funds sitting within this category.
The introduction of the new myGov website now means that you can view all of the accounts you have in one place. Merging them is even easier, it only requires the click of a button and due to this the ATO has seen a massive increase in accounts being merged since the launch of this website. This process is a world away from the old system that required us to fill out forms and provide certified documents to reclaim our money.
During the month of December 2014, there were over 265,000 accounts with balances exceeding $1.13 billion that were consolidated by their respective owners. Compared to the previous year of consolidations, there was an increase of over 400%, where only 52,000 accounts worth $270 million were consolidated in December 2013.
If this has got your attention, then you should also be aware that usually these super accounts may have cancellation fees. So it’s important to check this out before you move your money. Other factors to check are the insurance that your current fund offers as well as whether or not your current employer can contribute to your chosen fund once complete.
Lastly, don’t always consolidate the account with the largest amount in it, because this may not necessarily be the best one for you. An account with a smaller amount may be better, or opening a completely new one may too.
The Consolidation Steps
- Create a myGov account
- Link your ATO account to the myGov account
- Click the Super tab on the website
- Combine your accounts as you choose