Remember when you initially started your new job? Your initial thought isn’t likely to be about all the documents you signed before you started. But what if we told you that one of those documents, your super account, could have far-reaching consequences in your life? You may have just joined whichever superannuation fund your employer advised at the time. And perhaps you’ve done that for every job you’ve had since.
Where to start?
The first step is to contact your employer.
According to superannuation advisor, it’s also worth investigating whether there are any additional benefits to selecting a certain super fund.
While most of us have the option of selecting our own super fund, some workers protected by collective bargaining agreements and members of defined benefit plans do not.
A defined benefit fund, for example, is an employer-sponsored fund in which your benefit is determined by multiple parameters, including years of service and pay. Changes have been made to ensure that low-balance super accounts are not depleted by insurance premiums and fees.
According to the chief executive of the Association of Superannuation Funds of Australia, you should also chat to relatives, friends, and coworkers about the funds they’re in and their experiences. Most individuals will be interested in retail or industry funds. Superannuation advisors also proposes that you reduce your attention to three to five possibilities.
Once you’ve reduced your selections down to a few funds to examine, the most important factors to consider are performance, fees, and insurance.
The Types Superannuation of Fund
MySuper: Default funds to which you are assigned if you do not choose a fund. They have reduced costs and basic features.
Self-managed super fund: When you manage your own super. Each fund can have up to four members who are accountable for fund decisions. Setup and yearly operating fees might be significant, so it’s most cost-effective if you have a substantial balance.
Industry super funds: these were primarily established by trade unions to provide for their members’ retirement needs. They often offer fewer investment alternatives and are “not for profit” funds, which implies that earnings are reinvested in the fund for the benefit of all members.
These funds are mostly for federal and state government employees. Some employers contribute more than the 9.5 percent required. Profits are reinvested in the fund to benefit members.
A corporate investment fund: This is a fund set up by an employer for the benefit of its employees. Some are managed by a board of trustees, while others may be part of a larger retail or industrial super fund.
Retail funds: are often managed by banks or investment firms and offer a wide range of investment opportunities. The fund’s owner intends to preserve some earnings.
Defined benefit funds: these are often public-sector plans, and many are no longer accepting new members. The value of your retirement benefit is determined by criteria such as how long you have worked for your business and your income when you retire, among others. Some of these funds are exceptionally generous.
Then will have to compare the performance of other funds. Obviously, you want your fund to do well since it will influence how much money you have to retire on.
Because superannuation is a lifetime investment, Australian superannuation advisors do advise customers to critical think in the long term. However, because no one can forecast which fund will perform the best in the future, looking at prior data might be beneficial as an indicator.
Most super funds allow you to select from a variety of investing alternatives based on your risk tolerance. This is where things may become complicated since you’ll need to compare each investment choice independently, and super funds might have somewhat different names.
There are three basic categories of investment options:
- The “growth” option provides the greatest reward but also the greatest risk. It invests the majority of your money in stocks or real estate.
- A “balanced” option invests in fewer stocks and real estate and more in fixed income or cash-based assets. It seeks respectable returns but less than growth funds in order to decrease the risk of loss.
- A “conservative” investment strategy places a small portion of your money in fixed income or cash-based assets and a larger portion in stocks and real estate. It tries to limit the risk of losses and so has lower long-term returns.
- Compare like with like and look at what the fund invests in (for example, stocks and real estate, cash and fixed income).
- Try to use the same start and end dates for each fund because performance will vary.
You should also compare the costs charged by each fund.
Fees, according to the Productivity Commission, may be the largest drain on net returns, with Australians spending more than $30 billion in super fees each year.
According to new data, half of all women in their late 50s would retire with less than $50,000 in superannuation.
Your fund’s fees are either a fixed cash amount or a percentage of your balance — earnings or both — and are withdrawn from your super balance. Your costs can be found on your yearly statement or in the product disclosure statement, which is given by your super fund.
Remember to research other insurance possibilities
Superannuation advisors found out that most super funds include insurance, and around 70% of Australians receive their life insurance this way. Most of the time, you are forced to pay premiums, which are withdrawn from your super account balance. It’s frequently less expensive than buying it elsewhere.
Also, read the product disclosure statement to ensure you have enough coverage. A high-angle image of two workers at work on a building site
Superannuation normally includes three forms of insurance:
- Life insurance (also known as death cover): money given to the people you name as beneficiaries in the event of your death.
- Total and permanent disability insurance: Receive compensation if you become seriously ill and are unable to work again.
- Income protection insurance: provides a monthly income stream in the event that you are unable to work due to a temporary disability or illness.
The advantages of purchasing life insurance through a super are:
- Insurance policies are purchased in bulk by super funds, so they are usually less expensive than purchasing them separately;
- The money is deducted from your super, so no cash payment is required; and
- Some funds automatically provide cover without requiring a health check.
And here are some of the disadvantages:
The types of insurance available are restricted and frequently not customised to your specific needs.
- If you have multiple super accounts, you may be paying premiums on multiple policies but only be able to claim on one of them.
- Life insurance is frequently terminated at the age of 65 or 70.
- Superannuation does not automatically pass to your estate when you die. As a result, you’ll need to make a binding beneficiary designation to choose who receives your benefits when you die.
- Because premiums are removed from your super balance, the money available for retirement is reduced.
Are you a woman in need of superannuation assistance?
As an Australian superannuation advisor in Sydney, we understand that you face unique challenges because studies have shown that women: earn less than men; have less superannuation; are more likely to take career breaks; have lower levels of financial literacy
It’s time to make a shift. We aim to help you gain financial confidence and the knowledge and skills you need to secure your financial future.
So, let us all do it together, Send us your superannuation questions using our website, and we’ll do our best to get you an answer.