CARROTT: TOP UP YOUR SUPER
What is it?
Carrott is a savings app on your phone that allows you to sweep your virtual spare change from your everyday transactions into your super fund.
How does it work?
You download the free Carrott app on your iPhone or Android device. When you buy a coffee for $3.70, the 30¢ is “saved up” and once it reaches $5 it is swept into the Carrott account. Every month Carrott sweeps the balance in your account into your super fund.
What are the pros?
It is a painless, automated way to contribute more to superannuation. It can add up over time. For example, $10 a week means you are contributing an extra $520 a year (minus the fees) into superannuation (see Fact File). You are also keeping in touch with your super. Being aware of how much you have in your retirement savings is a good thing, as you can notice any employer contribution shortfalls and chase them up. A recent survey commissioned by ANZ found that 15% of Australians have no idea how much they have in their super.
What are the cons?
Not all super funds have joined so you may not be able to contribute to your fund, although more funds are signing up. Carrott checks your fund with you to see if it allows contributions through the app.
The cost is high compared with setting up your own top-up with your super fund – either before tax with your employer (salary sacrificing) or after you have paid tax from your bank account. You can do this at no cost.
What are the fees involved?
You pay 3.98% plus 30¢ for each transaction, plus $1 a month for account maintenance. For example, if you contribute $20 a month in two $10 transactions, totalling $240 a year, your total fees will be $28.75. This works out around 12% of your contribution, which is expensive.
Instead of going through Carrott, why not set up an automatic debit each month to your super fund directly via your bank account or pre-tax salary? You can do that easily and pay no fees.
How has it performed?
It is still early days, having been launched in September this year.
How safe is it?
The Carrott app holds the money for a month before it sweeps it into your superannuation fund. Under ASIC regulations, Carrott is required to hold a minimum of $5 a month with a maximum of $1000 a month. Christian Raftery, chief executive of Carrott, says users typically have around $ 40 to $60 each month. He says the personal details are kept in a decentralised system. A data aggregator (Envestnet Yodlee) stores all the bank information. Carrott stores your super fund membership number.
How do I get started?
Providing your super fund accepts contributions, you simply sign up to Carrott at carrottslc.com/ au. You provide your super fund details, email address and transaction banking account number.