Next-gen’s retirement guarantee

Millennials may be doing it tough today, but as the first generation to come of age in the era of bigger contributions they’ll reap the rewards tomorrow

- Vita Palestrant

It’s easy for millennials to feel hard done by. Unlike their parents, they’re unlikely to have a job for life or be able to buy their first home easily.

But there is one area where they will be better off. Come retirement, they will have accumulated far more super than their parents.

Why is that? For starters, when super was introduced three decades ago, the compulsory employer super contribution, or super guarantee (SG), was just 3% and default super, where most of the money goes, didn’t have the close regulatory oversight it has today.

Much has changed since then.

Millennials now enjoy a SG of 10.5% and strong MySuper investment performance. Super funds that fail to deliver are encouraged to merge with better funds by a watchful regulator.

Millennials, born between 1981 and 1996, are about to overtake boomers as Australia’s largest demographic. They are the beneficiaries of the improvements that have been introduced since super’s inception.

“One of the great benefits of our maturing superannuation system is that on average a millennial will retire with a great deal more super than their boomer parents,” says Martin Fahy, CEO of the Association of Superannuation Funds of Australia (ASFA).

“Currently a boomer aged 60-64 has an average balance of $180,000 if male and $140,000 if female, whereas a millennial, aged 27 with a $30,000 super balance and earning $60,000 a year, is projected to have $555,000 at age 67.”

He says there are a number of factors driving this.