Claiming lost super back from the ATO will help build your retirement balance

Grabbing your unclaimed super back from the ATO is profitable.

Grabbing your unclaimed super back from the ATO is profitable. Photo: Getty

Claiming back lost super held by the Australian Taxation Office could add $4200 to your retirement savings, according to new research.

Research house Rice Warner has found that the amount of lost super ending up with the ATO – where it only earns the inflation rate – is growing because the maximum size of the inactive accounts it hoovers up from the super system was last January increased from $4000 to $6000.

This resulted in a rise in the number of small accounts claimed by the ATO from around 4.1 million in 2015-16 to 4.6 million in 2016-17.

That represents a rise of 78 per cent on the number of accounts taken over in the 2014-15 year.

The ATO is now managing about $4 billion in lost or unclaimed superannuation accounts,

Lost funds are those in the names of people who are uncontactable and who have not made a contribution for five years, and they are scattered right across the country.

All up the ATO data shows that just over 6.3 million accounts are either lost or inactive but the majority have not been taken over by the ATO, probably because they are over the $6000 limit.

As at June 30, 2017, the value of these lost or inactive funds held within superannuation funds or by the ATO stood at just under $18 billion, Rice Warner said.

Rice Warner found more than 60 per cent of the lost accounts transferred to the ATO in 2015-16 were held by individuals aged between 30 and 49, and that the asset bases of funds it had taken over conferred with that reality.

This is likely to be the result of early to mid-career people switching jobs and not carrying over their relatively low balances  accumulated in previous jobs where salaries may have been low, Rice Warner said.

Because the ATO pays such low interest on accounts, members who delay recovering their lost accounts are missing out on additional fund returns they would get in a regular super fund.

Rice Warner found the average amount transferred to the ATO was around $1500 for those in their 30s.

“While on face value this seems small, if transferred to a fund and invested appropriately, consolidation can have a material impact on retirement outcomes.  Modelling … suggests that a 30-year-old on a salary of $50,000 with $1,500 in lost superannuation would be around $4200 dollars better off [in today’s dollars] by the time they reach 65 if they simply contacted the ATO and recovered their lost superannuation at age 30,” the group found.

ATO figures show that around 40 per cent of 15 million Australians with super have identified holding more than one account.

“Some people have a need for two accounts, usually for insurance purposes or being unable to combine a defined benefit and accumulation account. Yet, with more than 28 million accounts in total, it suggests many Australians hold too many accounts,” Rice Warner said.

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