If we want to all retire happy, one group of workers needs our help

When it comes to our superannuation schemes and balances, Australians are living through what could most politely be described as a bit of a tricky time. An awkward teenager phase, if you will. But among those of us with pimply, braces-clad balances, one group is perhaps most at risk of being a social pariah than any other.

On the one hand, the introduction of mandatory employer superannuation contributions three decades ago means that the vast majority of the 17 million of us who have it are on track to retire with an OK, if not robust, balance.

When we’re talking about super and long-term pain, there’s one group of Australians that we need to bring back into the fold, and fast.Credit: Dionne Gain

On the other hand, the number of Australians accessing their super early – either at the height of the COVID-19 pandemic, or for things like medical treatment through the Australian Taxation Office’s compassionate release of superannuation scheme – means that far too many of us are still well below where we need to be, and aren’t hitting milestones quickly enough.

According to research from the Association of Superannuation Funds of Australia, only 30 per cent of Australians will be able to retire comfortably if they were to do so today. The good news is that number is on track to increase to 50 per cent by 2050, but by anyone’s measure, only half of the population living comfortably in their later years is hardly a great measure of success.

What’s more, ATO data consistently shows that, not only are Australians across all generations not hitting the target balances we need to be on track, but that women’s balances are still falling well below men.

In 2021, for example, the ASFA data shows men aged between 60 and 64 were retiring with a median superannuation balance of just $211,996, while for women the figure dropped to $158,806.

Unlike those of us who are employees, people who are self-employed have the option to contribute superannuation … or not

When you consider the recommended balance for a comfortable retirement is $690,000 for couples and $595,000 for single people – and that all need to own their home outright – it’s clear we’re still a long way away from achieving a gray-haired utopia.

But when we’re talking about super and long-term pain, there’s one group of Australians that we need to bring back into the fold, and fast, unless we want to see a repeat of what we’ve spent the past 30 years trying to eradicate.

By the Australian Bureau of Statistics’ most recent count, 15.7 per cent of all working Australians are self-employed. Among those, the majority (around 9 per cent) are what the Household, Income and Labour Dynamics in Australia Survey refers to as “solo self-employed” - that is people who work for themselves and do not employ anyone else.

In its most recent report into self-employment, the Carmichael Centre’s David Peetz further described this group as falling into three main categories: those who are establishing a small business but are yet to bring on any staff; those who are forced to be self-employed but would prefer to be working as an employee; and those who are sole traders with no aspiration to either hire employees or be an employee. In layman’s terms, think of these people as sole traders, freelancers or independent contractors.

Somewhat unsurprisingly given the great post-COVID 19 job realignment we’ve seen taking place, this type of employment is a growth area, with the ABS recording an increase of non-employing businesses (AKA sole traders) of 4.9 per cent between 2023 and 2024.

Most of us would know at least one person who fits into this category of workers. They’re often the person taking off on overseas holidays at a moment’s notice or always randomly available at 3pm on a Tuesday on account of being their own boss, and just generally appearing to have a very glamorous, relaxing, and aspirational life on Instagram.

And while that’s no doubt true, and a work-life balance most of us could only dream of, when it comes to retirement savings, these are the same people who are among the most at-risk.

And that’s because for this cohort, there are no mandatory superannuation obligations. Unlike those of us who are employees, and guaranteed super contributions of 11.5 per cent from our employers, people who are self-employed have the option to contribute superannuation … or not. And that’s seriously scary.

ASFA estimates that as much as 20 per cent of self-employed Australians have no super at all, three times the rate of those who are employed but with no super (7 per cent).

The data also shows that even for those who are self-employed and do have super, the balances are still, on average, substantially lower – with a 2013-14 comparison showing the average employee balance to be $88,229, while the average self-employed balance was just $60,916.

It’s entirely understandable that after paying bills, withholding tax, and working on cash flow and savings, there may be little left to put aside for super contributions. And if you’re still decades away from retirement, it’s easy to push it down the priority list before quickly forgetting about it. But the success of super relies entirely on its long-term interest accrual.

While the government has existing incentives in place to encourage voluntary super contributions, it’s clear they’re either not working or need to be seriously strengthened. Because if we want to have any hope of reaching that gray-haired utopia where every retiree has enough super to live comfortably, we need to ensure that one in every 10 working Australians aren’t being left behind.

Otherwise, the awkward teenage phase could risk becoming a multi-decade reality.

Victoria Devine is an award-winning retired financial adviser, best-selling author, and host of Australia’s number one finance podcast, She’s on the Money. Victoria is also the founder and co-director of Zella Money.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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