A lack of basic advice is being blamed for thousands of retirees paying more tax than they should on their superannuation.
The Super Members Council (SMC) found thousands of retirees are paying more tax than they need because they haven’t been told to move their superannuation into the tax-free retirement phase.
SMC’s report revealed that around 700,000 Australians over 65 who aren’t working full-time still have their super in an accumulation (savings-phase) account, meaning retirees could be paying an extra $650 in tax each year on average.
For someone who leaves $100,000 in an accumulation account instead of moving it to a pension account, they could pay up to $4,500 more in super tax over their retirement. With $200,000, the extra tax could rise to $9,000.
Research indicates that this inaction is largely due to disengagement or lack of understanding about how to manage superannuation.
Super Members Council CEO Misha Schubert said this lack of knowledge can leave retirees worse off financially when they leave the workforce.
“Not knowing enough about super can lead to poor decisions, like leaving accounts inactive or withdrawing funds without proper planning.,” Schubert said.
“Making simple information and advice available to more Australians is a big missing piece of the retirement puzzle.”
These findings come after the Federal Government announced superannuation reforms in 2024 aimed at helping older Australians make better use of their retirement savings by improving the quality and transparency of superannuation, paving the way for a more secure retirement for many.
As part of the reforms package, the Federal Government is set to improve resources on its financial advice website, Moneysmart, and introduce new regulations to offer superannuation members more options.
The superannuation industry will also implement voluntary best practice principles to enhance the quality of services, while a new reporting framework will help retirees better track and compare their superannuation products.
Treasurer Jim Chalmers said the reforms “will empower more Australians to make the most of their superannuation”.
“Today I am announcing a new package of reforms that will help give retirees peace of mind, help them make their super go further and provide more support to navigate retirement,” Chalmers said in a speech to the Association of Superannuation Funds of Australia on Wednesday, November 20.
“These changes will empower more Australians to make the most of their superannuation through more trusted information, better products and greater transparency.”
The reforms will focus on four critical areas to strengthen retirement outcomes: