I first recognised the tremendous impact of making additional super contributions has over the long-term when I was advising the staff of a Brisbane based healthcare service.
The majority of my clients were from the nursing arena, and I was always so pleasantly surprised to see the impact of making personal contributions to super, along with a higher than standard employer contribution at the time, had on their super balance at every stage but most significantly in the lead-up to, and at retirement.
The same applies to members of NGS Super. The long-term impact of making additional, voluntary contributions, either before or after-tax (depending on the tax impact) has a profound impact on your super balance at various life stages.
My clients at NGS routinely ask me how their super balance compares to others around the same age. I can consistently confirm that on average, their super balance compared to other females their own age (and conversely the industry average for males) is much higher.
Additional contributions can make a big difference
This can be attributed to employing a long-term personal contribution strategy. If you start from day one of your working life by making extra personal contributions to your super balance, say 5% p.a., along with the current, super guarantee contribution rate of 12% p.a., a total super contribution of 17% p.a. will result in a fantastic uptick in your retirement savings.
I made sure to suggest this strategy to my niece. She was 21 years old and was about to start her first full-time teaching position straight out of university.
She opted for a 5% personal contribution when at the time the standard super guarantee rate was 9.5% however given the industry she worked in and as a result of strong union bargaining, her employer contributed a higher than standard super contribution rate of 12.75% p.a. to encourage staff to make personal super contributions of their own.
Despite having two career breaks along the way, my niece has not only accumulated a tidy balance in her super account, but she has been sure to mention this strategy to her two younger siblings when they embarked on their own careers (which I’m pleased to say they have undertaken).
The adage, you cannot miss what you do not have rings true here. My niece, has often commented on the strategy, even explaining to her younger siblings that she never missed that portion of her salary and was so pleased she started contributing personally to super on day one.
Meet Chloe and Chris. The table above tracks their superannuation balances at key life stages across three scenarios and shows the use of adding an extra 5% to Chloe’s super in the 11 years prior to having children, and then the impact of super splitting with a spouse for five years when Chloe takes time out of the workforce and eventually returns part-time. Key Assumptions: 2% annual pay rise. Chloe starting salary $70,000 and Chris starting salary $80,000.
Never too late to start
Don’t worry if you feel you may have missed the opportunity because it is never too late to start. You don’t have to be a 21 year-old university graduate to benefit from this strategy.
Regardless of when your additional contributions start, the important aspect is to simply start.
Make a conscious effort to understand your super and finances and consider making a small additional voluntary contribution to super.
Small steps now, can lead to much stronger outcomes for your future and assist to close the gender super gap.
Cheryl Haines is an Authorised representative #1006485 of Guideway Financial Services Pty Ltd AFSL #420367
