Paul Schroder from AustralianSuper talks about lost super and engagement with its members
Introduction to Paul Schroder from AustralianSuper
Ross Greenwood: The budget now is just four weeks away come this Tuesday. As a result, there’s going to be a lot of talk, as there already is right now, in regards to superannuation. It seems almost to me at the moment, that it’s all about affordability of housing for first-time buyers and how does the government and also the authorities control the runaway prices in Melbourne, Sydney in particular, but it even affects Canberra, and to a lesser extent now Hobart.
But then you’ve got the other point about superannuation. Now, superannuation is an absolute key because quite clearly the government is considering through recommendations of the Productivity Commission some significant changes to the way in which you would choose your superannuation fund and therefore, the way it might come with you during your life. Now, we’ve spoken about this on the program previously but it is important because one of the fundamental problems many Australians have got it is, I, until they get into their 40s, they do not engage with their super.
What do I need to do?
That’s because in many cases they sit and look at their super and go, “Well, I don’t think there’s enough there to really be worried about”. By the time it gets big enough, they suddenly start to think, “Well, actually I don’t think there’s enough money in my super fund. What do I need to do?” There’s big issues about all of this. Remember now, there are limits on the amount of money that you can get into superannuation if you salary sacrifice on an annual basis or from after-tax earnings or after-tax savings. The government’s change those rules. Let’s go through some of these issues with Paul Schroder from AustralianSuper, the Group Executive of Engagement, Advocacy and Brand because he’s in charge of trying to make certain the people understand that their money in their super fund is their money, and they’re going to keep an eye on it. Paul, many thanks for your time.
Paul Schroder: Magnificent start, Ross. It is people’s money, and that’s the central thing we need to think about with this system.
Ross: Okay, it’s young people who’ve got to understand this because the fact is while young people are right now struggling to get deposits for a first time, and we recognize the difficulties particularly Melbourne and Sydney. The fact of the matter is they might overlook their super. A lot of them saying, “Maybe we should grab our super and use that”. Maybe that’s a change of government should have: use it as deposit for a house. But that’s not the real answer because you’re robbing Peter to pay Paul for that. But it’s trying to have young people understand that the superannuation they’ve got is real and ultimately will end up adding up to something.
Paul: Yes. I think young people are going to have 91/2% of their first year’s salary in super so it’s a big deal. It’s important and it’s probably more money than they’ll save otherwise. The Chinese have got a proverb which is that “the best time to plant a tree was 20 years ago and the next best time is today”. I think many of your listeners might be listening to this program with their grown-up kids or other people in their family.
I’d urge the older people in the family who realize maybe a little bit late they should have paid a bit more attention to their super. I think they could be a key link in this which is talk to your grown-up sons, your grown-up daughters and say, “Look, if you make a good decision early, you can make a really big difference over the long term”. A smart decision made early and stuck with will make a big, big impact because of compound interest.
Ross: But the interesting thing about that, and I think you’re onto something here, Paul. This is a family conversation. Now on this program, we try to span the generations. The people we talk to are sometimes very young people; sometimes people in the middle of their working life who have changes; and sometimes people who are at the very end of their working life or indeed, very close to the end of their life in some cases. Vibrant people on the program today, still out there doing things. But the whole point about this is, it’s a family conversation. Because all of a sudden a young person can learn from the older person, but also the family conversation goes around housing and deposits, it goes to superannuation because it’s the bulk of the family’s money.
Paul: This is spot on, Ross. This is a family conversation; it’s a household conversation. It’s between partners; it’s between parents and kids; it’s between grandparents and their grandkids. Because what are we are all striving to do? We’re all striving to get a safe, good roof over our heads and enough money and enough income to live pretty well and they’re inextricably linked: super and housing.
Views on the upcoming Federal Budget
I like the reference to the federal budget because the federal budget is being handed down on May 9th, and that’s a time for the government to get itself in order. Maybe that night is a chance for families to try and think about their household budget and get that in order. What’s was a couple of things you could be doing this year that’s better than last year? Super should be in that discussion.
Ross: There’s no doubt. Because let’s be honest, the fact that you can accumulate money in that pot. But the one thing you made the observation, the reason why you want to have the conversation with people when they’re very young is to be able to say to them, “Hey, listen. The earlier you start the more money you will get”. As you point out about the tree planting early, the fact is if you actually put those seeds in the ground early, the compounding of interest rate will allow it to grow.
Then there is issues that quite clearly, the earlier you start if there are gaps in your career as a result of say, for example, family coming along or it might be because of no fault of your own or maybe it is. But the fact is that some people find that they struggled at work for a year or so. All of these things are the reason why starting early and trying to go hard while you can to save is very important.
Paul: Today’s dollar is going to be worth four or five at during retirement for a young person. It’s very hard to save money. That’s why the government introduced superannuation in the first place because they know we wouldn’t choose to save, but they know we have to save for our future. I think the idea that there’s a discussion that goes on between grandparents and grandkids or parents and their kids. It’s not going to be the most exciting conversation anyone has ever has. But if you could find a little bit more and if you could make a good decision about a fund and stick with a good one, you will make a material difference.
I absolutely bet there’ll be plenty of listeners listening today who say, “I’m glad someone in my workplace or someone who knew about this stuff put me onto it 20 or 30 or 40 years ago”. There’s a real opportunity here for your listeners who’ve got grown-up kids or kids just starting in the workplace to say, “Look, I know this is boring as hell but just take an interest now and you’ll thank me in 20, 30 years because of this impact of compound interest”. [crosstalk]
What is it now? $12 billion
Ross: Because one of the most common things we get on this program is, “Why didn’t anybody talk about this when I was younger? Because we found out too late and as a result got to play catch-up”. The problem is playing catch-up. The other thing also Paul, is just the amount of loss super sitting out there. What is it now? $12 billion or something ridiculous. Yet you can track down your loss super now. I know a lot of that loss super is basically foreign workers who have come to this country, put the money into the super fund and then disappeared and gone out. But the fact of the matter is there’s a lot of lost super that relates to local people and local companies.
Paul: Yes. I think Ross, it’s even a bit worse than just the lost super. The travesty of the system and the great rip off the system, actually, is that so many people have so many accounts. There are nearly 30 million accounts and there should only be 15 or 18 million. You’ve got about 12 million too many accounts. This is not just for young people, it’s not just middle-aged, it’s older people as well. Every one of your listeners, I bet if you did a quick scan most of them will have more than one account.
Now, what’s wrong with that? You’re paying fees on something you don’t get value from. You might be paying insurance on something you don’t know anything about, and you’re not bringing your money together so you can see it as a valuable asset. There’s loss super and there’s about $12 billion to be found. Recently, we’ve put people in touch with about 120,000 or so of that. There’s loss super, there’s money to be found but there’s too many accounts. It is actually a travesty; people shouldn’t have so many accounts. It’s easy to fix and you can save cost, save fees and reduce unnecessary insurance if you just take a fraction of a minute of interest in that topic.
Ross: All you’ve got to do is go to the Australian Tax Office’s website. You’ll find the information there and you can get yourself in touch with any superannuation from all jobs you might have had. I’ll tell you what: it’s a good reminder, it’s a good wake-up. We’ll keep on doing this because it is important that people keep on talking about it. Paul Schroder is the Group Executive of Engagement, Advocacy, and Brand at AustralianSuper, sponsors of this program. Paul, we appreciate your time.
Paul: Thanks, Ross.
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