Millennials, you could be $50,000 richer by retirement, says ASIC
Millennials are missing out on as much as an extra $50,000 in their retirement savings, as out-of-touch super funds don’t do enough to engage with young customers, the corporate regulator says.
While young people were keen on improving their financial outlook, they generally lacked support from the superannuation industry to help them make smart fiscal choices, said Simone Constant, commissioner at the Australian Securities and Investments Commission (ASIC).
Tomorrow’s retirees often switch off when they hear some of the old-school terminology used by super companies. Credit:
“They are missing out on real opportunities to make some simple decisions now that can compound over the coming decades and really have significance in financial terms at that point of retirement,” Constant said in a telephone interview on Wednesday.
Research from ASIC’s education platform Moneysmart showed nearly half of respondents born between 1981 and 1996 admitted to not knowing much, if anything, about how to make the most of their superannuation.
There is about $2.7 trillion held in superannuation in Australia, excluding self-managed super funds, with Millennials the first generation to benefit from compulsory super contributions made from the day they started working.
But the industry’s stuffy, future-focused language was missing the mark with a generation busy making financial decisions every day, she said.
“When they hear ‘nest egg’, ‘retirement planning’, ‘pensions’ – those terms from their funds just don’t resonate,” she said.
The commissioner said digital resources such as online tools, calculators and goal-setting information were also not up to scratch for millennials accustomed to having knowledge at their fingertips, such as minute-by-minute data in banking apps.
Sydney electrician Tom Davidson said though his super app lets him check his balance, he would like to see providers offer more comprehensive education to customers.
Electrician Tom Davidson would like to get more advice from his super fund. Credit: Photo supplied
“We have to make these contributions to these funds, we have to nominate funds... [Super funds] have just got to have way more information and give the consumer more power with knowledge, just so you actually know what you’re getting yourself into,” the 31-year-old said.
A roundtable discussion led by ASIC, which included millennial money experts, couldn’t identify any super funds that were engaging millennials successfully, Constant said.
“This is a message to the whole super fund industry to think of your members as customers,” she said. On the flip side, Millennials should think and act like customers and understand that super is a wealth-creating opportunity.
Constant said checking a fund’s performance, comparing costs, and not having more than one super account incurring fees were simple actions individuals could take now.
Potential savings can add up over the course of a career, she said: “If it comes to $20 per week by making these sorts of changes, because of just the simple magic of compounding effect, that’s $50,000 [by retirement].
“That is really significant in terms of missed opportunity.”
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.