How much did a 29-year-old lose in pensions this year?

Equity market volatility and rising interest rates have had a negative impact on the super sales of many Australians in the 2021-22 financial year.

With so much talk lately about how much you really need to save for retirement, it’s understandable that many are worried about sustained losses to their nest egg.

So how much did Australian super fund members lose in the 2021-22 financial year? RateCity calculated the numbers.

Case study

Lauren started her first full-time job in 2015 when she was 23 years old. She had a starting salary of $50,000 and began collecting Super Guarantee contributions from her employer. As a member of one of Australia’s best performing super funds, she enjoyed an average return of 10.18% in the early years of her career, ending the 2020-21 financial year with a super balance of $38,064.

If Lauren’s super fund had continued to generate a return of 10.18% in fiscal 2021-22, she could have expected her balance to grow to $47,250, a return of $3,857. in addition to employer contributions.

Instead, his super fund’s returns over the past fiscal year were -3.37%. This resulted in a loss of $1,278, with her balance ending the year $5,135 less than she might have expected based on her fund’s past performance.

Lauren’s retirement income

Age Financial year Salary Submissions Expected benefits Balance
23 2015-16 $50,000 $5250 $227 $4674
24 2016-17 $51,500 $5408 $710 $9931
25 2017-18 $53,045 $5570 $1252 $15,830
26 2018-19 $54,636 $5737 $1860 $22,436
27 2019-20 $56,275 $5908 $2541 $29,821
28 2020-21 $57,964 $6086 $3300 $38,064
29 2021-22 $59,703 $6269 -$1278 $42,115

*Source: RateCity Note: Earnings for fiscal years 2015-2021 calculated based on the average 5-year annualized balance returns of the top five performing products in 2021 (10.18%). Profits for the 2021-22 financial year calculated on the basis of the average returns of the balances of the same five funds in this year alone (-3.37%). Takes into account contribution and income tax, plus wage inflation.

Depending on what stage of your career you are currently in and how close you are to retirement, you may have seen a greater or lesser retirement pension loss than the average 29-year-old. But even smaller losses can have a real impact on the opportunities to earn compound interest over your decades-long career.

However, the retirement pension is a long-term investment which should fluctuate over time. So there’s probably no need to panic and make rash decisions about your nest egg. Instead, consider making a plan to regularly check in on your super and make logical, knowledgeable changes when needed.

How can you give your super the best chance at success?

While you can’t control the global stock market, there are things you can do to have more control over the success of your retirement nest egg, including:

Keep an eye on performance

Even some of Australia’s top super funds with the best past performance posted negative returns last year. But there are tools you can use to ensure your fund is still performing relatively well.

If you’re in an underperforming MySuper fund, you may soon find out after the release of the Australian Prudential Regulatory Authority (APRA) MySuper 2022 performance test results – which saw five out of 69 products fail. If so, it’s important to be proactive and consider better performing options.

If your fund passed the test or you are not a member of a MySuper fund, it is always worth benchmarking its performance against others to ensure it remains competitive. RateCity’s Super Fund Comparison Chart lets you compare performance over the past 5 years across a range of products and providers.

Compare fees

The next factor to consider is the amount of fees charged by your super fund. Fees can gradually eat into your balance over time, so it’s important to make sure you know exactly how much you’re paying in fees and what they cover.

If your super fund charges significantly higher fees than similar products, without offering any additional value, it might be time to consider your options.

Australian Revenue Authority (ATO) offers a handy tool for comparing MySuper products, including annual fees charged. And if you’re not a member of a MySuper fund, RateCity’s super comparison charts also provide estimated fees across a wide range of funds.

Make voluntary contributions

If you’re looking to grow your super balance at a faster rate than super collateral alone can achieve, you might want to consider making voluntary super contributions. You can do it in two ways:

  1. Pay contributions before tax – Pre-tax contributions are made by your employer on your behalf out of your pre-tax income. These payments, together with the super guarantee from your employer, constitute what is called your concessional contributions. They have a limit of $25,000 in total per fiscal year.
  2. Make after-tax contributions – If you reach the limit on concessional contributions, you can choose to make super contributions from your after-tax income, called non-concessional contributions. The amount of nonconcessional contributions you can make each fiscal year is capped at $100,000, for those with super balances below $1.6 million.

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