Australians just put $50 billion in superannuation for the first time ever in a three-month period. That’s an absolutely insane amount of money for people to be stashing away. Before the pandemic we’d be lucky to put $20 billion in super every three months. (nb the line spikes in the last quarter of each year as people put money in super just before tax time.)
What’s happening? There are at least three factors at play
– Employers are putting a bit more in super for us. The “super guarantee” has gone up from 9.5 per cent in early 2021 to 10 per cent then to 10.5 per cent in the latest year of the chart above.
– More people have jobs. You’ve heard that unemployment is low – that means more of us putting money in super.
– Hours worked is up too. People who once worked part time are going full time. And people who worked full time are often doing overtime. This is because companies are desperate for staff but also because people need the extra hours to pay their bills. People are making a bit more each week and getting more super too.
(The irony is the people doing extra hours could really use that cash right now instead of saving it up for when they are over 60.)
But that doesn’t seem enough to explain the chart above. It can’t all just be people working more and naturally accruing more super can it?
I dived back into the data and confirmed, nope. A massive chunk of the increase inflows to super is personal contributions. People are taking big chunks of cash they have sitting in their bank and putting it in super. That stepped up suddenly in the pandemic. Where’s all that money coming from?!
The 2017 spike in personal contributions was about a rule change that made people rush money into super, but the most recent uplift isn’t about any rule change. We’re just saving more.
I checked to see if it might be older people selling their homes, downsizing and putting the money in super. But that theory doesn’t seem to hold up – the housing market has been quiet recently with the number of sales at below last year. And the number of homes listed for sale is well below where it used to be.
Another theory is people who got cash in the pandemic – e.g. money that came into small business owners in the form of Jobkeeper and cashflow support payments – are slowly sending that cash into super. One thing we know for sure is that some people have a lot more super than others. So who has how much, and are you keeping up with everyone else? should you be putting more in?
Who has how much?
The average amount of super people in Australia have is $206,000, but that number isn’t really useful by itself, is it? Old people will have more and young people will have less. Here’s the average super amount by age (data is from 2021 so it doesn’t include all of the recent surge in inflows).
Of course, that is still not the whole picture. Men tend to have more super than women. So if we truly want to see how we compare, we should break it down by gender. Here’s that chart. If you’re 30-35 and male and you have $97,000, you’re average. If you’re the same age and female you need $74,000 to be average.
But average can be misleading. That average probably makes you feel bad! You’re probably below it, because a small number of people have way more super than everyone else and they drag the average up.
Here’s the distribution of super for three different age groups. The graphs break the group down into 20 groups each with 5 per cent of people in them, from least super to most. You can see there are plenty of groups with no super. If you’re 30 and you have $36,000 in super, you’re right in the middle. If you’re 30 and you have $200,000 in super, you have more super than 95 per cent of Australians your age.
Putting it in super is about the smartest thing you can do with money in Australia. You pay less tax and so long as you’re confident you’ll live to be 60, you’ll get it back. But having spare money to put in super is a privilege, and even more so now with the cost of living crisis.
One thing we can say is that the big lift in personal super contributions is probably down to a small group of wealthy people. They’ll be the ones driving new Mercedes in retirement.