On 1 July 2024, the super guarantee (SG) – the amount of super employers are required to pay their staff – rose to 11.5% of each employee’s earnings. However, employees at Swan Hill Rural City Council have benefitted from progressive increases in employer contributions since 2018 as part of a unique initiative designed to boost their retirement savings.
The increase in employer contributions was first introduced through Swan Hill Rural City Council’s 2018 Enterprise Agreement, which proposed raising employer contributions over three years. Employees had the choice of a 2% pay increase each year without any change to their employer super contributions, or a 1.5% pay increase and a 0.5% increase in employer super contributions each year.
When the 2021 Enterprise Agreement came into effect, the scheme was repeated for another three years. This means Swan Hill Rural City Council has been paying additional employer contributions on top of the SG rate as follows:
- 1 July 2021 12.0%, (SG rate 10.0% plus 2.0% – (1.5%) from the 2018 EA and (0.5%) 2021 EA)
- 1 July 2022 13.0%, (SG rate 10.5% plus 2.5% – (1.5%) from the 2018 EA and (1.0%) 2021 EA)
- 1 July 2023 14.0%, (SG rate 11.0% plus 3.0% – (1.5%) from the 2018 EA and (1.5%) 2021 EA)
- 1 July 2024 14.5%, (SG rate 11.5% plus 3.0% – (1.5%) from the 2018 EA and (1.5%) 2021 EA)
Only 11 staff opted out of the scheme when it was first introduced six years ago. For the other 234 Swan Hill employees, the obvious benefit has been a bigger lump sum being deposited into their super account. And thanks to the power of compound interest – which is returns on returns, or earnings on earnings – the more money that goes in, the greater the multiplying effect on your employees’ super savings.
While our investment options aim to generate positive returns, it’s worth noting that it’s normal for super balances to go up and down from time to time. Depending on how someone’s super is invested, it may be impacted by fluctuations in financial markets, but it’s the long-term performance that counts.
This graphic shows the difference extra super contributions can make to your final retirement balance.
*Projected super balances are estimates only based on assumptions and are provided for comparison purposes only. Assumptions include: return of 7.5% (before investment fees and earnings tax), 7% tax on earnings, 2.5% inflation and 1.2% rising community living standards, investment fees of 0.85% and admin fees of $74 pa. Insurance costs are not included.
Source for projected super balance calculations and assumptions: https://moneysmart.gov.au/how-super-works/superannuation-calculator (Assumptions as of 1 July 2024). Results are shown at 1 July after you reach the indicated age on the chart, e.g. the super balance shown for age 67 is the balance at 1 July after your 67th birthday. Assumptions may turn out to be incorrect. Projected super balances are not guaranteed.
A welcome boost for retirement outcomes
Ashley Free, Finance Manager at Swan Hill Rural City Council, opted in to the scheme the year it was introduced. In his early forties at the time, he said that there is a lot of commentary about the number of Australians retiring with insufficient superannuation and it was something he wanted to prioritise.
“I figured that 0.5% of our annual EA increase going to super was an amount that I was likely not going to miss from my take-home pay and at the same time begin to address the suggestions that we should all be paying more into our super than just the government guarantee.
I only have to look at my super balance over the past six years to see the benefits. I’ve played around with the ‘how much super do I need in retirement’ calculators, and when you do the calculations with and without the 3% in our numbers, it really becomes obvious how beneficial this will be once I reach retirement.
Employer contributions over and above the SG are still relatively uncommon, and Ashley said that most staff have opted in to the scheme.
“I don’t believe we’ve had anyone elect to opt out since it started. However, we have had a number who opted out originally, decide that it would be beneficial if they opt in and we also believe that the additional super is appealing to potential employees.
“This arrangement was undertaken with the employees’ best interests in mind to provide them with an opportunity to improve their financial position at the time of retirement.”
Your employees may not be aware that adding a little extra now could make a surprisingly big difference to their retirement income, helping them enjoy a better quality of life in their twilight years.
We can help you empower your staff to create a more financially secure future for themselves. If you would like more information on employer super contributions, please call Paul Filia on 1300 304 947 between 8.30am and 5pm Monday to Friday. Or you can email us anytime at [email protected].