Superannuation – The Basics
When it comes to Superannuation, people grasp the concept that it is a savings plan for their retirement, but it is something that they don’t want to spend much time learning the fundamentals about.
Simply put – Superannuation is a tax effective way to save for your retirement that is built over a lifetime of working.
Employees (excluding self-employed) earning more than $450 per month are entitled to receive the Super Guarantee Contribution of 10.5% of their wages into their designated super fund. This money is pooled with other members’ money and invested on your behalf by professional investment managers, into investments such as shares, property and managed funds. Generally, you will not be able to access this money until you retire.
Did Someone Say… Insurance?
Not everyone is aware, but it’s a standard practice to have insurance attached through your superannuation fund, whether you have asked for it or not. Typically, there are 3 different types of insurance that are offered to superannuation members:
1. Life Cover
2. Total & Permanent Disability
3. Income Protection
Depending on the type and amount of cover, premiums for your insurance will be deducted from your super savings. Unless you have specifically declined insurance, there’s a good chance you will have some somewhere!
Fees Fees and More Fees!
In a report commissioned by Industry Super Australia, Australian’s are paying a whopping $31 billion in fees yearly for their superfunds! With so many funds, and so many investment options, understanding your superannuation’s fee structure can have a significant impact on your retirement balance.
In the example below, you can see a 30-year-old with a starting balance of $20,000, earning $50,000 p.a, who changes their fee structure from 2.5% to 1%, will be $81,000 better off at retirement age.
(Assuming no other fees and charges, insurance premiums, static 8% rate of return and salary)
Step 1: Investigate Your Superannuation
Great News – you’re ready to take control of your retirement savings – where do you start? First step would be to investigate how many superannuation accounts that you have. As of June 2017, 14.8 million Australians had at least one super account. As you can see from the below table, 40% have at least two or more accounts – that’s a staggering 5.92 million Australians paying more fees with multiple funds! If you are unsure how many superannuation funds you have, we can help complete a lost super search on your behalf:
https://www.ato.gov.au/forms/searching-for-lost-super/
Number of Super Accounts Total Individuals
1 account 60%
2 accounts 25%
3 accounts 9%
4 or more accounts 6%
It's Time To Play Detective
So you have established how many funds you have, and with which companies. It’s now time to ask them the hard questions.
Depending on the type and amount of cover, premiums for your insurance will be deducted from your super savings. Unless you have specifically declined insurance, there’s a good chance you will have some somewhere!
- Are your employer contributions being paid
- What is your current balance?
- What is your money being invested into? (And does this suit your investment profile?)
- What returns has your investment option achieved, short and long term?
- What fees am I paying?
- What insurance do I have?
- What help is available to me?
- So now you have some numbers and figures around your superannuation, where to next?
Need help asking your superannuation fund the tough questions? We can do the dirty work for you!
All you need to do is provide us with the authority to act on your behalf by completing this form along with providing a copy of your I.D.
Step 2 Compare Your Superannuation
Congratulations! You have taken the first step by locating and investigating where your superannuation stands. By now, you should now know how many super accounts you have, what your balances are, how your money is invested, what fees you are paying, and what type of insurance you have.
In today’s society, we compare everything. As consumers, we are savvy enough nowadays to chase the best deals on the market in a variety of fields. From comparing health insurance, general insurance, hotel rates, airfares, electricity through to mortgage rates, we compare most things in daily life.
It is a bit surprising that perhaps our greatest asset remains something of a “set and forget” type deal, where we usually only start to perhaps take notice when we are closing in on retirement. Once you have the information surrounding your current funds, it’s time to utilize this information against the marketplace
It’s Time To Compare
There are just 161 superannuation funds in Australia. It’s time to think what is important to you… We like to compare funds on few main criteria:
PERFORMANCE
How has your fund performed vs other fund performances? Performance measured over 1, 3, 5, 7, 10 years?
FEES
What fees am I paying vs what fees are commonplace? Are they performance based? Or Static Fees? Are they high compared to others?
INSURANCE
What insurance do I have vs what insurances are available? How much are the premiums? Group product or tailored? Do I need them?
INVESTMENT OPTIONS
What is my investment option vs what investment options are available? What investment options are there? Does it suit my risk profile?
Step 3: Take Control Of Your Super
So, you have taken the time to investigate where your superannuation stands, and measured how it performs against other superannuation funds – What now?
IT’S TIME TO TAKE CONTROL
If you have discovered that you have multiple superannuation funds, it’s time to consolidate them into one account. If you have discovered that your fund is not performing to expectations, join a fund that is. Found out you are paying too much in fees, join a fund that charges less.
“Inaction may be safe, but it builds nothing.”
Don't Forget!
The Government provides ways to boost your superannuation balance, take advantage if you can!
- Concessional Contributions – The contributions are a before-tax contribution, and include the compulsory employer S.G contribution, additional employer, salary sacrifice and personal tax-deductible contributions. A popular strategy is the salary sacrifice arrangement, where your employer can make additional super contributions when you arrange for some of your pre-tax salary to be paid into your super fund. Your salary for tax purposes is then reduced while the additional contributions are treated as employer contributions. There currently is a $25,000 p.a cap on this type of contribution, and penalties apply if you exceed the limit.
- Non-Concessional Contributions – These contributions are an after-tax contribution paid from your personal savings. Again, there is currently a limit of $100,000 p.a on this type of contribution, but another way that can help boost your fund! …and one last thing…
Self-Managed Superannuation
If you are still not happy with the choices available, an option many Australian’s are turning to are
Self-Managed Superannuation Funds.
This doesn’t mean that you do the investing yourself, as most people will have professional help, but it does mean you have greater choice and control over what your superannuation is invested in. It also is the only superannuation vehicle that allows investment into direct property.
Yes, that’s right – with the right balance, you could be purchasing a house!
Everyone Can Benefit From a Better Super
INVESTIGATE YOUR SUPER
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COMPARE YOUR SUPER
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TAKE CONTROL OF YOUR SUPER
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MORE ENJOYABLE RETIREMENT
By following these three simple steps, you will be taking control of your superannuation, and plotting a course to a brighter retirement!
Interested to know more? We are here to help!
Secure Your Financial Future:
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Join the thousands of hard-working Australians retiring with more money. Make small changes today by booking a call with one of our experts.
