There is a trust gap amongst the younger cohort and millennials in the superannuation system that will hinder their potential to make extra contributions to superannuation, according to Vanguard Investments Australia.
Principal and head of market strategy and communications, Robin Bowerman, said convincing the younger cohort to trust the super system enough to make extra contributions carried with it a heavy dividend.
Speaking at a thought leadership breakfast at the 2017 SMSF Conference in Melbourne on Wednesday, Bowerman cited Rice Warner research commissioned by Vanguard, which showed a female aged 20 earning an average weekly wage and getting market returns who retired at 65 in 2061 would have a super account balance of $642,900 in today's dollar terms.
"But if they trusted the super system to add a modest five per cent in additional contributions the account balance they would project would be almost 50 per cent higher at $956,000," he said.
Bowerman said account balances would receive a further boost if there was a concerted effort by the industry to lower fees, adding the industry had time on their side to enhance the system to engage with millennials.
SMSF Association chief executive and managing director, Andrea Slattery said it was difficult to fathom that the younger cohort that were well aware of their budget position and tax situation did not engage with the fact that 9.5 per cent of their earnings were going into their super because it was only going to be an issue 40 years hence.
"I think as an industry we have an obligation to remove the myths, to get the facts out, not to bring out facts that are contradictory, that are self interested or gouge something that will give you a competitive edge," Slattery said.
In terms of pre-retirees and those who have retired, and with 48 per cent of the self-managed superannuation sector's assets in the drawdown or pension mode, Vanguard research showed 49 per cent of Australian pre-retirees aged between 55 and 75 believed there was a national retirement crisis while 42 per cent of post-retirees also agreed with this assessment.
However, only 12 per cent of pre-retirees believed they faced a personal retirement crisis.