Another day, another negative article about superannuation. What’s wrong with it, what’s enough, who is missing out, who is to blame, the high fees, poor performance, complexity and so on. Where are the actionable solutions?

A recent ABC article,  “How much money do you need to retire?” Provided one supposed answer and it depended on one big thing.

This article highlights the differences of opinion from experts on how much you need (not enough in my opinion) and the gender gap (which is only getting worse for older women). What was a shame was that their magic solution between having enough to retire on or living in poverty, is owning your own home (and probably getting the Government pension). In other words, Superannuation for most is still not solving the retirement problem.

No wonder the overwhelming number of Australians are worrying or fearful about not having enough in retirement, is second only to climate change!

This does seem ridiculous, when Australia’s $3 trillion super industry, just can’t get it right for everyday Australians. The retirement/superannuation debate seems to be focused more about vested interests than providing proper, affordable and achievable retirement solutions.

And let’s face it, superannuation was designed to be ‘the’ retirement solution for all Australians. Governments, Banks, Unions, Superfunds all take their slice of the super pie and, as a result, have their own opinions as to who should best run and take care of it (making plenty of lot of money on the way through).

The fundamental issue is that with so many vested interests, we are all missing the big picture here, that is, most are not retiring with enough and we have a government pension scheme that will continue to struggle as people live longer.

What’s worst about all this, the only solution it seems is to increase the superannuation guarantee contribution paid by employers from 9.5% to 12% pa (and let’s not kid ourselves, employers see this as just another increasing tax rather than an employee benefit).

Doesn’t raising taxes as a solution sound all too familiar to you?

How about we look at this another way: let’s use education once to fix it.

As the famous saying goes “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”

So how can education solve the retirement problem you ask?

With education around superannuation and more specifically the investing of superannuation, we have a simple solution. Anyone who has had investment advice could tell you, the most important factor is ‘how’ your superannuation is invested is, not ‘how much’ you are contributing.

‘Strategic Asset Allocation’ does not sound sexy but with one click you could fix most people’s future retirement problems (Asset allocation just means how much percentage you have in different asset classes in your investment or superannuation fund, that is, assets such as shares, property, fixed Interest and cash).

If you feel this is too simplistic as a solution, consider this. We can look historically at the markets here in Australia for over 100 years of data, and over 200 years in the UK and USA. With the simple fact that as long as you have at least 10+ years to leave your funds to invest, shares have outperformed all other asset classes.

So what do I mean by changing asset allocation? Well around 90% of working Australians are invested in the Balanced/Growth fund in their super plan. Let’s assume that means around 60% plus is in shares. Compared to with one click you move your superannuation to High Growth which has around 80% plus in shares.  Historically, on average High Growth has outperformed Balanced/Growth funds by at least 2% per annum. 

Yes it comes with slightly more risk, and this is based on history but that’s why it has to be at least 10 years as an investment time frame, to smooth out the ups and downs of sharemarkets.  Remember the average person has their superannuation for at least 30 years so time is definitely on your side to take advantage of this.

What does 2% per annum actually mean as does not sound like much I know. Well in its simplest form, for the average working life (30 plus years), with the compounding interest effect, would mean your money would double by the time you retire. So, if you were expecting to retire on $500,000, it would end up around $1 million in your account. Now that’s worth taking notice about especially as I stated earlier the vast majority of Australians are in Balanced or Growth.

You have just gone from not retiring on enough, to retiring comfortably. It just took a click of a button on your superfund’s website to go from Balanced (or Growth) to High Growth, and then just forget about it.

That’s seems to me a lot easier than having to make extra contributions, or the vested interest of increasing the superannuation guarantee contribution rate up to 12% as the only solution.

I am not saying don’t increase contributions as that will always help. What I am saying is that we need to better at education of Australians at school and work, at the benefits of ‘how’ our superannuation is invested.  Let’s teach Australians ‘how’ to fish, so that as in the quote, and our superannuation, it lasts a lifetime.

I have written a book The Money Sandwich, How to manage money better in your 50s and 60s to help provide the ‘education’ Australians need especially when it comes to retirement and retiring comfortably.


Article by Marc Bineham – Money coach, speaker and award-winning author of The Money Sandwich