A couple having a joint bank account is a well established concept. And when you get down to it, a couple can share just about every other aspect of their finances: their credit cards, mortgage, investments and many insurance products too. But currently a couple can’t share their super account, unless of course they go down the road of establishing a self-managed super fund (SMSF).
This might not be the case for too much longer, though, as joint super is an idea that’s been picking up steam among some industry figures and groups lately. Some of these parties believe it may have some merit when it comes to improving retirement outcomes, and have said as much in their submissions to the Australian Government’s ongoing Retirement Income Review.
But, if it becomes an option, the decision to bundle your retirement nest egg together with your partner’s in the same super account would likely be much more significant than opting to share a transaction account, and could come with some additional risks.
Here’s our overview of joint super accounts, including how they might work if made a reality, and some of their potential pros and cons.
What is a joint super account?
While the current superannuation system in Australia allows one person to have multiple different super accounts with different funds and then to consolidate them if they wish, it ordinarily does not allow two individuals to bundle their savings into a joint or shared account. Theoretically a joint super account would change this and allow a couple to consolidate their super savings – or potentially just part of them – into one account, leaving them with one larger balance which they would both be responsible for.
SMSFs already allow for shared saving for retirement, but the time, effort and cost required to set one up and manage it may mean this is not a viable option for many people.
What are experts saying about joint super accounts?
Two of the main benefits of joint super accounts that have been put forward by their proponents in the superannuation and financial services industries are that they would simplify the superannuation system overall, and potentially help to close the super balance gender gap.
Financial consulting firm Rice Warner has been calling for joint super accounts since 2014, saying that they would both “help to reduce the female retirement savings shortfall” and “reduce the number of superannuation accounts by several million”, subsequently reducing administration costs for super funds, which could in turn “leave more in the members’ accounts to accumulate to retirement”.
The SMSF Association has backed the call to extend joint super accounts to those whose retirement savings are held in industry or retail funds, noting in a submission to the Retirement Income Review that couples often make decisions together, and should have the option to do so when it comes to their super and planning for their retirement.
However, rather than specifically advocating for the creation of joint super accounts to address the gender gap in super, the National Council of Women Australia suggested that sex discrimination laws be amended in order to allow employers to make larger super payments to women.
What are the potential pros and cons of a joint super account?
If joint super accounts became available outside of SMSFs, there would be several points to take into consideration before signing up for one, both positive and negative.
- Lower fees: Rice Warner has argued that joint super accounts would see individuals paying less in fees on their super balances. This is because two people would be paying one account’s worth of fees, instead of both paying separately, and because a reduced number of superannuation accounts would result in super funds charging lower administration fees. Considering Australians may be paying thousands per year in super fees, reducing that amount may be an attractive prospect to many consumers.
- Ease of management: A couple having all their super in one place may have an easier time of managing and proactively engaging with their super.
- Potentially difficult to unwind: While little has been said so far about what would happen in the event of a divorce or separation, it would potentially be difficult to decide what amount of a joint super account’s balance should be allocated to each party. Super may become just one more consideration for divorce settlements or a prenuptial agreement, if you and your partner choose to draw one up.
- Less insulation from investment losses: If you and your partner have separate super accounts and one of you sees their balance dip significantly due to market conditions, depending how it’s invested, the other’s super balance may see a smaller decrease, or no decrease at all. However, if you and your partner have a joint super account and it isn’t well diversified, your shared retirement savings could take a bigger hit due to poor investment performance than if your super balances were in separate, differently performing funds.
- Loss of agency: Rice Warner notes that some women’s advocacy groups have pointed out that giving couples the option to consolidate their super accounts could facilitate economic abuse by an already-abusive partner. Keeping a couple’s super accounts separate could help prevent an abusive partner from having control over their partner’s retirement savings.
What are some alternatives to opening a joint super account?
If you’re looking to grow your partner’s super, or link your finances more closely to theirs, there are a handful of existing options available to you.
You can make a contribution to your spouse’s super account, which could help grow their balance.
You could also, if you’re willing to put in the time and effort, start an SMSF with your partner, which would allow you to have a joint super account with them. However, this process can be complex, and will generally require the help of an accountant or financial planner, which means it may also end up costing you a significant amount to do.
Remember, the concept of joint super accounts is still entirely hypothetical outside of SMSFs. Whether they become a reality or not, it may be worth seeking the advice of a financial adviser, who can offer you and your partner guidance on your super, including what options might be best for both of you.