Payday Super is here. What does it mean for your retirement savings?

“For most employees, the most noticeable change is when super contributions are paid. The key change is that contributions reach their super account sooner and are easier to track.”

However, A/Prof. Hanewald says the biggest benefit of the reform may not be investment returns alone.

“One of the most important changes is that employees can more easily identify when superannuation has not been paid. Under the previous system, unpaid contributions could go unnoticed for months,” she says.

Will Australians end up with more money?

With Payday Super, a 25-year-old median-income earner currently receiving their superannuation quarterly and wages fortnightly could be around $6000, or 1.5% better off at retirement.

A/Prof. Hanewald says the long-term benefit comes from allowing contributions to start earning returns earlier.

“Every super contribution has the potential to generate investment returns. By reaching a person's super account sooner, those contributions have more time to benefit from compounding over the course of a working life,” she says.

What does the new reform mean for businesses?

The reform means businesses may need to rethink their cash flow and payroll processes.

“The new payment deadlines are supported by changes to Single Touch Payroll reporting and the SuperStream system, helping employers integrate super payments into their existing payroll processes,” says A/Prof. Hanewald.

A/Prof. Hanewald explains that the shift is likely to have the greatest impact on businesses that have traditionally relied on holding super contributions until the quarterly payment deadline.

“Businesses will no longer be able to hold super contributions until the end of the quarter. For some employers, particularly smaller businesses, that may require adjustments to cash flow management and payroll processes,” she says.

Many employers already use payroll software that can automate super payments, which should help ease the transition.

“Although there may be some initial administrative changes, paying super alongside wages can create a more consistent payroll process for businesses and provide greater certainty that contributions are being made on time,” she says.

While some businesses may need time to adapt, the reform is intended to make paying super a more routine part of the payroll process.

What should employees do now?

While employers are responsible for paying super, A/Prof. Hanewald says employees should also take an active interest in their retirement savings.

“Reviewing your super account is a simple way to make sure your retirement savings are tracking as expected. The legal test is when the contribution is received by the super fund, not merely shown on a payslip,” she says.

A/Prof. Hanewald says it is still important for workers to understand their entitlements and raise any concerns with their employer if payments appear to be missing.

“As Payday Super becomes part of everyday payroll, the reform aims to make it easier for Australians to keep track of one of their most important long-term financial assets,” says A/Prof. Hanewald.