Maximise your super through consolidation
Staying on top of your superannuation can be challenging for any number of reasons. Governments keep moving the goal posts when it comes to how much you can contribute at a tax-effective rate.
There are also strict rules about when you can access it, the tax your beneficiaries pay on your super, and how much you can withdraw if you get sick or are injured and can no longer work.
There’s a mountain of information that is often highly technical and relatively few working people have the time or inclination to deal with. Having said that, there are some simple steps you can take to gain more control.
Super is, after all, a vehicle into which nearly 10 per cent of your gross income is contributed for your entire working life so it makes sense to do everything in your power to maximise your final payout amount. You might live a long time in retirement without a job – here’s hoping!
Consolidate your funds
With few exceptions, you can roll all of your super funds into one account, which is usually a sound financial move. It not only helps you keep track of how much you’ve accrued, but could save you a fortune in fees and charges over the term of your working life.
Many funds have a fixed minimum weekly administration fee which you may be paying multiple times if you have your super in a multitude of accounts.
Australians spend more than $20 billion a year on fees relating to super, according to a Grattan Institute study. A fixed fee on a relatively small amount in some funds could be eating away at the capital and the fund may have nothing left in it after a few years. It is also common for life insurance to be attached to a super fund, and the premiums may also be reducing the balance without you realising it.
Having multiple accounts also makes it difficult to keep track of all your funds and increases the likelihood of you forgetting about some completely. The Australian Taxation Office’s figures for the end of 2014 revealed there was over $8 billion lying dormant in super accounts that had not received a contribution for over five years.
Check insurance, performance and asset type
Once you’ve decided to consolidate, there’s nothing stopping you from placing the money into one or two of your existing funds, or choosing another fund entirely. The fund should match your risk appetite with the right mix of growth and defensive assets to meet your needs.
You should check what insurance cover comes with each fund. Some funds have income insurance built into the payments structure while others may have better death benefits. If you switch to another fund you may have to change your insurance arrangements, which can be potentially more expensive than what you’re paying now. You may want to continue with the fund that has the best insurance. Some funds also have different defined benefit structures, depending on their age.
You should also look at the investment performance of the fund over the long term and consider whether it is likely to meet your retirement income needs, who the management is and what they’re investing your money in. There’s a huge range of funds to choose from and if, for example, you prefer a fund that is not investing in coal or gambling assets, you can opt for a so-called ‘ethical’ fund.
You can enlist the help of a financial planner if you feel overwhelmed by the task of finding a fund that is right for you, or speak to the service centre at one of your existing funds about your needs.
Finally, once you’ve decided on the fund you want to roll your other accounts into, ask the fund to do the consolidation for you and to locate any potential missing super. Most funds are more than happy to oblige new or existing customers in this work.
For more information about consolidating your super visit ASIC’s MoneySmart website, which also has hints on selecting the right fund for you.
Have you discovered lost super when consolidating?