The Super Members Council found that around 700,000 Australians over 65 who aren’t working full-time still have an accumulation account and could be paying an extra $650 in taxes each year on average. Altogether, they have $90 billion in accumulation accounts.
The council said this is because they didn’t receive basic advice to switch their super into the tax-free retirement phase.
According to the SMC, if someone keeps $100,000 in an accumulation account instead of moving it to a pension account, they could pay an extra $4,500 in super taxes over their retirement. For $200,000 balances, the extra tax could be $9,000.
It added that some inactive accounts belong to people who are still working and adding to other accounts or keeping an accumulation account as a backup. However, research shows many people don’t act because they are disengaged or don’t know what to do.
A consumer survey of retirees found about six in 10 Australians with a lower balance (less than $100,000) who have an inactive account keep it because they haven’t decided what to do with super yet or don’t know what to do with their account.
SMC CEO Misha Schubert said Delivering Better Financial Outcomes financial advice reforms would be crucial to help retirees access quality information at low cost.
“Not knowing enough about super can lead to poor decisions, like leaving accounts inactive or withdrawing funds without proper planning,” Schubert said.
“Making simple information and advice available to more Australians is a big missing piece of the retirement puzzle. The coming financial advice reforms will help make advice more affordable.”
Schubert said the government needs to introduce the legislation quickly to enable the 2.5 million Australians on the runway to retirement to get the high-quality information they need to plan wisely at a much lower cost.
