Australia: Small businesses not the key to Super

Small business owners are largely ignoring their superannuation needs, instead relying on their business to provide for their retirement.

Only just over 60% of owner managers have superannuation, with the median total superannuation balance currently at $11,200¹.

"These figures are quite worrying, and highlight a huge problem in Australia," says Shaun Williams, Aviva’s general manager, group business development.

"Firstly almost 40% of small business owners have no superannuation at all² and secondly for those with superannuation the average balance is far too low to allow for a comfortable lifestyle during retirement."

Many small business owners believe their ‘business is their super’. Yet, in Australia, 85% of the 1.6 million small businesses have less than five employees and are predominantly family owned (approximately 96%), rather than owned by a traditional head of the business³.

"This poses a big question," comments Shaun. "Is the rest of the family involved in your business really prepared to fund your retirement?"

"Do you really want your superannuation to depend on your children being happy to sell part, or all, of the business, or members of your family having the capital to buy you out of the business?"

It’s also important your superannuation doesn’t depend on the future success of your business. Profit levels can rise and fall over the years, or you may need to inject further capital into a struggling business – it’s important not to jeopardise your future lifestyle because you are too busy looking after your business.

The average annual income for small businesses is $279,270, with expenses topping $247,292 – that’s only an average profit of $32,000 (13.4% per year)⁴.

"Is this enough to fund your retirement, look after your family members and live on right now? Small business owners tend to be juggling a lot of balls – don’t let dropping one of these cost you your retirement," says Shaun.

It’s a simple, research now suggests that an income of 'at least $30,000'* a year is what most people want during retirement⁵. And for this, an investment target of at least $410,000* ⁶ is necessary, for a retirement period of twenty years.

"Can your business guarantee this income? If not, it’s time to get a financial plan together that doesn’t put your future at risk. Small business owners wouldn’t ignore the future financial direction of their business so they certainly shouldn’t overlook their own future needs," comments Shaun.

By seeing a financial adviser, small business owners can establish a financial plan incorporating their business, family and individual needs.

¹Australian Bureau of Statistics, Superannuation: Coverage and Financial Characteristics, September 2001, Canberra.

²Australian Bureau of Statistics, Superannuation: Coverage and Financial Characteristics, September 2001, Canberra.

³Australian Bureau of Statistics, Australian Social Trends, 1997 Canberra.

⁴Australian Bureau of Statistics, Experimental Estimates, Regional Small Business Statistics, February, 2004, Canberra.

⁵The Association of Superannuation Funds of Australia Limited, An Adequate Retirement Income?, June 2001, Sydney.

⁶Invested at a rate of four per cent per annum , inflation nil, tax on investment earnings nil and 20 years of retirement assumed

* All figures quoted based on today’s dollars.

For further information please contact:
Simon Morgan
+61 3 9829 8892
mob:+61 407 966 632

Notes to editors:

• Aviva Australia is a group of two specialist financial services companies: Navigator and Norwich Union Life Australia Ltd. Portfolio Partners, the Australian funds management arm of Aviva plc, is a sister company. Through these companies we provide products and services in the areas of wealth creation, wealth management and wealth protection for more than 300,000 customers throughout Australia.
• Globally, Aviva Australia is part of Aviva plc, the world’s seventh largest insurance group, the largest insurer in the UK and one of the top five life companies in Europe. Aviva was formed in May 2000 through the global merger of CGU plc and Norwich Union plc.
• Aviva is the world’s seventh-largest insurance group and the biggest in the UK. It is a leading provider of life and pensions products to Europe and has substantial businesses elsewhere around the world. Its main activities are long-term savings, fund management and general insurance. It has premium income and investment sales from continuing operations of A$66.08 billion, and more than A$472 billion of assets under management (as at 1 January 2004). The group has more than 59,000 employees and 25 million customers worldwide.
• The information in this document reflects Norwich Union Life Australia Limited's (NULAL) and NULIS Nominees (Australia) Limited's ('NULIS') understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information is not, nor is it intended to be, comprehensive or a substitute for professional advice on specific circumstances. The securities advice or information given in this document is of a general nature and has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision on the basis of the advice above, a prospective investor needs to consider, with or without the assistance of a professional adviser whether the advice is appropriate in the light of their particular investment needs, objectives and financial circumstances.
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