What is super, actually?

What frightened me was the timing, and how recently I had learned that things end fast. Those women were a generation ahead of me. They had run out of road, but I still had some.

In 2020, Housing for the Aged Action Group counted 405,000 Australian women aged 45 and over at risk of homelessness. In England, Crisis counts over-55s facing homelessness up by more than half in five years. Australia counted the women. Most countries count the total and stop there.

Yesterday I wrote about the debt behind my magazine, and the Barefoot Investor steps I used to clear it. Those steps run in order. Debt first, then a home, then lift your super. The house came later, so super was where I looked, and I had been paying in for years while understanding it only in outline.

Superannuation is money held in trust in your name, and you leave it alone until the law lets you have it. In PNG you can access it at 55, or after 25 years of service, and only once you've stopped working.

Most of us picture a savings account. I pictured one for years. The fund pools contributions and buys shares, property, bonds and infrastructure, then puts the returns back to work to earn returns of their own. Nasfund averaged returns of 8.91% a year over five years, against 3.56% inflation. At 8%, money left alone roughly doubles in nine years, then doubles again in the nine after.

Kumul Hardware has 22 staff, so the law reaches it. Joseph works the counter there on K1,000 a fortnight. The business adds 8.4% of his base salary on top of his pay and deducts a further 6% out of it. So in total it sends K84 to the fund and takes K60 from Joseph. K144 lands in Joseph's account, and K60 of it comes out of his hand. Round figures, for the shape.

I ran that K144 out, every fortnight for eighteen years.

Joseph and Kumul Hardware put in K67,500. The fund earns 78,000 while Joseph is at work and at the end of 18 years the account holds K145,500.

I went looking for what else the rules allow. PNG lets members draw on it for housing, and after twelve months without work.

Nambawan Super finished last year with K13 billion for 245,514 members, Nasfund with K9.45 billion across 744,213. I divided those up: the average Nambawan member has K53,000 behind them, the Nasfund member K12,700.

In August, Nambawan's chief executive Lachlan Baird put the country's four funds at K24 billion, a sixth of GDP. Australia's pool runs to twice its own economy, and ASFA runs a calculator there that turns a birth year into what you're supposed to have.

Both PNG funds treat that 6% deduction (before tax) as a floor. It’s possible to do what Pape says and lift your super. Nambawan members raise theirs with a pay variation form through payroll, up to 15%, and Nasfund runs a voluntary contribution form of its own.

For five years I was the employer, so both halves of that K144 were mine. Run that across a decade of self-employment and the benchmark becomes a different question. It assumes an employer paying in every quarter for forty years. Plenty of us built something instead.

I know where I sit now, and I would rather know. Those women in the headlines are why I went looking.

Best

Amanda

P.S. What’s your view on today’s newsletter? Did I miss something out that you’d like to share? Write to me, [email protected]. I may not get back to you, but I will try to read what you send in.

Wild Money is general information only, drawn from my own experience and research. It isn't financial advice, and nothing in it is a recommendation to buy, sell, hold or manage money in any particular way. What worked for me won't necessarily suit you. Please seek advice from a licensed financial adviser before making decisions about your own money.