Thousands of young Australians have been enjoying the annual summer rite of passage – working in retail or hospitality – and many will stay to become part of the next generation embarking on their first big job or even a future career.
The skills and experience the millennials develop through hard work cannot be understated, not only in terms of growing a solid work ethic, but also in crucial life skills like managing money and savings.
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Not all retirement funds are the same. It's worth giving your super a quick health check.
Many young Australians, however, are missing out on the opportunity to learn how to manage their own superannuation savings. Under the law in Australia, a significant portion of employees, including many in the retail sector, are not free to choose their own super fund.
While retirement might well be another planet for 20-somethings, the money they save in super in those early years is critical to the quality of life they will enjoy after they stop working in 40 or 50 years' time. The demography statistics tell us that the age pension won't stretch to cover millennials in retirement, so the choices they make on saving for their retirement through superannuation is critical, right from the first pay packet.
Trade unions – quite legally – can and do prevent employees from exercising choice. It's common practice for unions to negotiate enterprise agreements which include terms that force employees to join the industry super fund owned by that union.
Two of the country's biggest employers, the retail giants Coles and Woolworths, both have some union-backed enterprise agreements which prevent employees from choosing their own superannuation fund.
These agreements between the union and the employer stop the employer from making super payments to any fund other than the fund owned by the union, even if this is against the wishes of the employee.
If the mandated fund is not doing as well as other funds, the inability to be able to freely shift savings into a better performing fund really starts to bite as employees reach retirement.
APRA, the regulator for the superannuation industry, has released data that shows there is a significant gap between the higher performing superannuation funds and poorly performing funds, with the best funds averaging returns of more than 14 per cent since the commencement of MySuper, and the worst a little as 4 per cent over the same period.
A small gap in rate of return or member fees can blow out to a massive gap 40 or 50 years on. A simple example based on ASIC's Money Smart superannuation calculator shows that a difference in the rate of return of only 1 per cent for someone of average income can result in a difference of more than $65,000 in accumulated savings when they retire.
A 20-year-old employee who is forced into a super fund today – and who can't move into a better one – may well end up retiring with significantly less than they could have if the law had allowed them to choose or to change.
Both David Murray's Financial System Inquiry and the Royal Commission into Trade Union Governance and Corruption have recommended the law be changed to enable all Australians to have the right to choose their own fund. Assistant Treasurer Kelly O'Dwyer has proposed the legislation, which is expected to be introduced to Parliament early this year. The next step for the modernisation of superannuation will be to open the protected default system to market competition.
The compelling case for reform is in.
The superannuation industry is surely the last remaining significant sector of our economy which is protected from open market competition and which is preventing employees from getting the best possible outcome for their hard-earned, 40-year-long mandatory salary sacrificing into super.
Those bright-eyed, bushy-tailed young workers entering the modern economy today ̶ a generation of digital natives who've grown up in a world of few barriers and unlimited choices – are going to be pretty shocked to find they can't always do what they want with their own money.
Sally Loane is chief executive of the Financial Services Council.