Australian workers are losing millions of dollars in interest due to laws that allow superannuation to be paid quarterly rather than fortnightly, new research reveals.
The Industry Super Australia (ISA) analysis of Tax Office data shows that in 2015 around 2.3 million workers aged 20-29 collectively missed out on $35 million in interest; 1.9 million aged 40- 49 missed out on $55 million; and 1.6 million aged 50-59 missed out on $50 million.
The total for all workers (age 20 to 69) was $225 million.
ISA chief executive, Bernie Dean, said the figures highlight the absurdity of continuing with laws that allow superannuation entitlements to be withheld for up to four months.
“We’ve welcomed any and all efforts to improve compliance, but it won’t change the fact that
some employers will go on using the payment hiatus for business cash flow,” says Dean.
“Essentially, workers are subsiding businesses at the expense of their retirement savings”. “Every penny counts in retirement, and this interest could be the difference between having
enough and going without,” he said.
“It’s not fair, and the rules must change”.
Currently, while pay-slips may record superannuation entitlements, they do not confirm actual payment. Recent polling shows 70 per cent of workers are unaware of this.
To streamline payment processes and enhance transparency, ISA is calling on the federal parliament to synchronize superannuation payments with wage payments. This is consistent with a 2017 Senate Committee recommendation that superannuation be paid either monthly or at the same time as wages.
Former Treasury official, now ISA special retirement income adviser, Phil Gallagher, conducted the analysis.
He found that, for a person working full time on average wages from age 20 to 67, the real lifetime gain from fortnightly payments would be $12,475.
A copy of the analysis is available
