Get App
Small contributions can make a big difference to your super balance at retirement. Here’s a look at the potential benefits.
A lot of people don’t think twice about spending $10 on a takeaway meal or glass of wine. It may not feel like a big sum to spend. But you might be surprised at what impact that $10 could have over the long term if you used it to top up your super fund each week instead.
Canstar crunched the numbers based on several hypothetical scenarios and found that $10 a week could potentially turn into as much as $32,586 by retirement for a 20-year-old. For a 50-year-old who is closer to retirement age this could still add an extra $8,540 to their super balance.
This is largely thanks to the power of compound interest which is basically when you earn interest on your interest. It has a greater effect over longer periods of time.
Canstar looked at the impact of salary sacrificing $10 a week or $25 a week could potentially have to the super balance of someone who is 20, 30, 40 and 50.
Keep in mind these are just hypothetical scenarios and the numbers will vary based on your individual situation including your age, salary, your super balance and the returns of your super fund.
The returns on these scenarios are assumed to be 7.76%pa which is based on the five-year performance of balanced investment options on Canstar’s database. Of course, always remember that past performance is no guarantee of future returns.
A 20-year-old
The younger you are the bigger the potential gains. The 20-year-old in this hypothetical scenario could have $962,935 in their super at retirement if they relied simply on super guarantee contributions. If that 20-year-old salary sacrificed $25 a week though they could possibly boost their balance by $81,466.
Superannuation retirement balance projection
← Mobile/tablet users, scroll sideways to view full table →
| Base scenario – no salary sacrifice |
Equivalent of $10 per week salary sacrificed | Equivalent of $25 per week salary sacrificed | |
|---|---|---|---|
| Starting age | 20 | ||
| Retirement age | 67 | ||
| Starting gross annual income | $74,516 | ||
| Starting balance | $5,335 | ||
| Annual investment returns | 7.76% | ||
| Starting annual insurance premium | $193 | ||
| Total amount salary sacrificed (after 15% contribution tax) |
$0 | $9,743 | $24,357 |
| Account balance at retirement | $962,935 | $995,521 | $1,044,401 |
| Difference to base scenario retirement balance | – | $32,586 | $81,466 |
Source: www.canstar.com.au. Prepared on 9/09/2021. Scenario begins at the start of the 2021-22 financial year and is based on a 20-year-old with a starting balance of $5,335 (per APRA Annual Superannuation Bulletin), starting gross annual income of $74,516 (per ABS Characteristics of Employment – median employee earnings), and retiring at age 67. SG Contribution amounts per Government announced rates, and along with the salary sacrifice amounts, is assumed to be paid into superannuation fund quarterly. Employer contributions are assumed to be taxed at 15%. Net investment returns assumed to be 7.76% p.a. based on the average annual 5-year return of non-lifecycle balanced investment options on Canstar’s database (with returns effective to 31 Jul 2021). Average life and TPD insurance premium of $193, is assumed charged at the end of each year based on products available for a 25-year-old on Canstar’s database. Annual income and insurance premiums are assumed to increase with inflation each year. Inflation is assumed to be 2.5%p.a. due to the rising cost of living (CPI Inflation) plus a further 1.5%p.a. due to the rising community living standards. End balance at retirement and total salary sacrifice amounts are shown in “today’s dollars”, i.e. they have been adjusted for inflation. Please note all information on income and superannuation performance returns are used for illustration purposes only. Actual returns and the value of your investment may fall as well as rise from year to year; this example does not take such variation into account. Past performance is not a reliable indicator of future performance.
A 30-year-old
By adding $25 a week into their super the 30-year-old in this example could add an extra $55,306 to their super balance by age 67. Salary sacrificing just $10 a week could potentially give them a boost of $22,123.
Superannuation retirement balance projection
← Mobile/tablet users, scroll sideways to view full table →
| Base Scenario – no salary sacrifice |
Equivalent of $10 per week salary sacrificed | Equivalent of $25 per week salary sacrificed | |
|---|---|---|---|
| Starting age | 30 | ||
| Retirement age | 67 | ||
| Starting gross annual income | $74,516 | ||
| Starting balance | $25,096 | ||
| Annual investment returns | 7.76% | ||
| Starting annual insurance premium | $285 | ||
| Total amount salary sacrificed (after 15% contribution tax) |
$0 | $8,903 | $22,258 |
| Account balance at retirement | $684,005 | $706,128 | $739,311 |
| Difference to base scenario retirement balance | – | $22,123 | $55,306 |
Source: www.canstar.com.au. Prepared on 9/09/2021. Scenario begins at the start of the 2021-22 financial year and is based on a 30-year-old with a starting balance of $25,096 (per APRA Annual Superannuation Bulletin), starting gross annual income of $74,516 (per ABS Characteristics of Employment – median employee earnings), and retiring at age 67. SG Contribution amounts per Government announced rates, and along with the salary sacrifice amounts, is assumed to be paid into superannuation fund quarterly. Employer contributions are assumed to be taxed at 15%. Net investment returns assumed to be 7.76% p.a. based on the average annual 5-year return of non-lifecycle balanced investment options on Canstar’s database (with returns effective to 31 Jul 2021). Average life and TPD insurance premium of $285, is assumed charged at the end of each year based on products available for a 35-year-old on Canstar’s database. Annual income and insurance premiums are assumed to increase with inflation each year. Inflation is assumed to be 2.5%p.a. due to the rising cost of living (CPI Inflation) plus a further 1.5%p.a. due to the rising community living standards. End balance at retirement and total salary sacrifice amounts are shown in “today’s dollars”, i.e. they have been adjusted for inflation. Please note all information on income and superannuation performance returns are used for illustration purposes only. Actual returns and the value of your investment may fall as well as rise from year to year; this example does not take such variation into account. Past performance is not a reliable indicator of future performance.
A 40-year-old
In this example, by topping up their super account by $25 a week this 40-year-old could potentially increase their super balance by $36,099 by retirement. And salary sacrificing $10 a week could see their super grow by an extra $14,440.
Superannuation retirement balance projection
← Mobile/tablet users, scroll sideways to view full table →
| Base Scenario – no salary sacrifice |
Equivalent of $10 per week salary sacrificed | Equivalent of $25 per week salary sacrificed | |
|---|---|---|---|
| Starting age | 40 | ||
| Retirement age | 67 | ||
| Starting gross annual income | $74,516 | ||
| Starting balance | $61,247 | ||
| Annual investment returns | 7.76% | ||
| Starting annual insurance premium | $395 | ||
| Total amount salary sacrificed (after 15% contribution tax) |
$0 | $7,660 | $19,149 |
| Account balance at retirement | $513,692 | $528,132 | $549,792 |
| Difference to base scenario retirement balance | – | $14,440 | $36,099 |
Source: www.canstar.com.au. Prepared on 9/09/2021. Scenario begins at the start of the 2021-22 financial year and is based on a 40-year-old with a starting balance of $61,247 (per APRA Annual Superannuation Bulletin), starting gross annual income of $74,516 (per ABS Characteristics of Employment – median employee earnings), and retiring at age 67. SG Contribution amounts per Government announced rates, and along with the salary sacrifice amounts, is assumed to be paid into superannuation fund quarterly. Employer contributions are assumed to be taxed at 15%. Net investment returns assumed to be 7.76% p.a. based on the average annual 5-year return of non-lifecycle balanced investment options on Canstar’s database (with returns effective to 31 Jul 2021). Average life and TPD insurance premium of $395, is assumed charged at the end of each year based on products available for a 25-year-old on Canstar’s database. Annual income and insurance premiums are assumed to increase with inflation each year. Inflation is assumed to be 2.5%p.a. due to the rising cost of living (CPI Inflation) plus a further 1.5%p.a. due to the rising community living standards. End balance at retirement and total salary sacrifice amounts are shown in “today’s dollars”, i.e. they have been adjusted for inflation. Please note all information on income and superannuation performance returns are used for illustration purposes only. Actual returns and the value of your investment may fall as well as rise from year to year; this example does not take such variation into account. Past performance is not a reliable indicator of future performance.
A 50-year-old
The potential gains for a 50-year-old are not as impressive as for those who are 20 or 30 but still nothing to be sneezed at. Salary sacrificing $25 a week could potentially increase their super balance by $21,350.
Superannuation retirement balance projection
← Mobile/tablet users, scroll sideways to view full table →
| Base Scenario – no salary sacrifice |
Equivalent of $10 per week salary sacrificed | Equivalent of $25 per week salary sacrificed | |
|---|---|---|---|
| Starting age | 50 | ||
| Retirement age | 67 | ||
| Starting gross annual income | $74,516 | ||
| Starting balance | $116,438 | ||
| Annual investment returns | 7.76% | ||
| Starting annual insurance premium | $427 | ||
| Total amount salary sacrificed (after 15% contribution tax) |
$0 | $5,819 | $14,548 |
| Account balance at retirement | $406,736 | $415,276 | $428,086 |
| Difference to base scenario retirement balance | – | $8,540 | $21,350 |
Source: www.canstar.com.au. Prepared on 9/09/2021. Scenario begins at the start of the 2021-22 financial year and is based on a 50-year-old with a starting balance of $116,438 (per APRA Annual Superannuation Bulletin), starting gross annual income of $74,516 (per ABS Characteristics of Employment – median employee earnings), and retiring at age 67. SG Contribution amounts per Government announced rates, and along with the salary sacrifice amounts, is assumed to be paid into superannuation fund quarterly. Employer contributions are assumed to be taxed at 15%. Net investment returns assumed to be 7.76% p.a. based on the average annual 5-year return of non-lifecycle balanced investment options on Canstar’s database (with returns effective to 31 Jul 2021). Average life and TPD insurance premium of $427, is assumed charged at the end of each year based on products available for a 25-year-old on Canstar’s database. Annual income and insurance premiums are assumed to increase with inflation each year. Inflation is assumed to be 2.5%p.a. due to the rising cost of living (CPI Inflation) plus a further 1.5%p.a. due to the rising community living standards. End balance at retirement and total salary sacrifice amounts are shown in “today’s dollars”, i.e. they have been adjusted for inflation. Please note all information on income and superannuation performance returns are used for illustration purposes only. Actual returns and the value of your investment may fall as well as rise from year to year; this example does not take such variation into account. Past performance is not a reliable indicator of future performance.
Making extra contributions to super
There are a number of ways you can make voluntary contributions to your super including pre-tax and post-tax. The scenarios outlined above assumed pre-tax contributions – also known as ‘concessional’ contributions.
When you salary sacrifice into super you generally ask your employer to deposit some of your salary directly into your super account instead of your bank account.
There can be tax advantages of making contributions via salary sacrifice. That’s because these will be treated as an employer super contribution and will be taxed at a maximum rate of 15%. If your marginal tax rate is higher than that you’ll essentially be paying less tax on that money.
It is important to be aware though that there are limits to how much you can add to your super. The cap on concessional contributions is currently $27,500 each financial year. Keep in mind this amount includes your employer contributions.
If you’re comparing Superannuation funds, the comparison table below displays some of the products currently available on Canstar’s database for Australians aged 30-39 with a balance of up to $55,000, sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Use Canstar’s superannuation comparison selector to view a wider range of super funds.
Fee, performance and asset allocation information shown in the table above have been determined according to the investment profile in the Canstar Superannuation Star Ratings methodology that matches the age group specified above.
Cover image source: Melica/Shutterstock.com
This content was reviewed by Editorial Campaigns Manager Maria Bekiaris as part of our fact-checking process.
Share this article