If you regularly make voluntary contributions to your super fund, the following statistics may take you by surprise. Just 22% of Australia's paid workforce age 15 and over make voluntary super contributions – whether salary-sacrificed contributions or personal after-tax contributions – into their super funds, according to Trends in Superannuation, a report by the Australian Bureau of Statistics (March 2009). And 44% of the workforce relies solely on Superannuation Guarantee (SG) contributions while the remaining 34% is not making contributions from any source. That's right, 34% – more than a third of the workforce! These percentages are staggering and, of course, are among the key reasons why Australia has such a huge gap between its level of retirement savings and the level of savings considered desirable. Why does such an overwhelmingly high proportion of the workforce make no voluntary contributions to super? Not surprisingly, the ABS report emphasised the "strong association" between the sizes of a person's income and their "propensity to contribute". "Of all the people age 15 years or older [in the workforce], 46% of those with gross personal incomes of more $2000 a week were contributing through salary-sacrifice or contributions from after-tax income," says the ABS. "In contrast, only 12% of those with gross weekly personal incomes of $300-$599 were making or receiving such contributions, with just 3% contributing through a salary-sacrificing arrangements," the ABS adds. (Most of the information in this ABS report – including on such factors as size of contributions and contributors' incomes – was collected between April and July 2007.) Researchers had asked different age groups why they do not make voluntary super contributions: - Members age 15-24 cited cost, lack of interest, feeling too young to justify contributions, and a belief that SG contributions were enough.
- Members age 25-34 were less likely to feel too young to contribute, and gave priority to paying off their mortgages as the main reason for not contributing. Otherwise, this age group gave similar reasons to their counterparts age 15-24.
- Members age 35-44 also gave mortgage repayments as their biggest reason for not making salary-sacrificed or after-tax contributions. Other frequently-voiced reasons included feeling too young to contribute, and cost.
As our attention increasingly focuses on the rapid-ageing of the Australian population and on the retirement savings gap, such research should gain increasing attention in the wider community.
19th-February-2010 | 
