It’s your money. Sort it out

Here is our stepby-step guide to sort­ing out your su­per­an­nu­a­tion

Fraser Coast Chronicle - - COMICS, PUZZLES -

THE RE­CENT Pro­duc­tiv­ity Com­mis­sion re­port on the health of the su­per­an­nu­a­tion sec­tor was pretty scary. And it’s only go­ing to get worse when the bank­ing royal com­mis­sion turns its blow­torch on to su­per funds in the next few weeks.

Two main is­sues from the Pro­duc­tiv­ity Com­mis­sion re­ally hit home … that there are so many dud su­per­an­nu­a­tion funds rip­ping off their in­vestors; and that you ba­si­cally need $1 mil­lion in a self man­aged su­per fund to make it worth­while, as op­posed to be­ing in­vested in an in­dus­try su­per fund.

The Fed­eral Gov­ern­ment de­ci­sion to cap man­age­ment fees is a good de­ci­sion, as is its com­mit­ment to adopt many of the rec­om­men­da­tions from the Pro­duc­tiv­ity Com­mis­sion.

But de­spite su­per­an­nu­a­tion be­ing the sec­ond big­gest as­set (be­hind their home) of most Aus­tralians, it con­tin­ues to be so mis­un­der­stood. We reckon it’s a com­bi­na­tion of the com­plex­ity of the sys­tem and the fact our com­pul­sory con­tri­bu­tions are taken out of our wage al­most by stealth.

We know the boss makes su­per con­tri­bu­tions on our be­half but we don’t give it a sec­ond thought.

It’s that dis­con­nect with our su­per­an­nu­a­tion (un­til we re­tire) which has al­lowed the su­per­an­nu­a­tion sec­tor to get away with so much. Be­cause we as in­vestors don’t fo­cus on su­per as much as we should, we don’t put enough pres­sure on the trus­tees and fund man­agers to do bet­ter.

Now is the time to fo­cus on that nest egg, take charge and make sure you’re not be­ing ripped off. So dig out your last su­per­an­nu­a­tion state­ment and fol­low this ac­tion plan;

TRACK DOWN ANY ‘LOST’ SU­PER­AN­NU­A­TION

With more than 31 mil­lion su­per ac­counts in Aus­tralia to­day, and an av­er­age of 1.5 ac­counts per per­son, there is a huge chance you have money in an ac­count you’ve lost. Just go to your www.my.gov.au ac­count and dou­ble check.

UN­DER­STAND THE SNAP­SHOT

One of the first things you’ll see in your state­ment is a snap­shot of your ac­count.

Your ac­count bal­ance will be shown at the start of the state­ment pe­riod, usu­ally July 1 of the pre­vi­ous year.

You’ll then see a record of all the con­tri­bu­tions and with­drawals you’ve made over the year, the to­tal value of fees, in­sur­ance pre­mi­ums and taxes you’ve paid, and your to­tal in­vest­ment earn­ings.

It’s al­ways worth dou­ble check­ing your em­ployer con­tri­bu­tions to en­sure you’re get­ting paid the right amount. If not, fol­low up with HR.

At the end of this, sim­ple maths will give you your clos­ing bal­ance. While this is a handy ref­er­ence, it’s light on de­tail, which means you need to read past this page.

CHOOSE YOUR IN­VEST­MENT OP­TIONS WISELY

Most su­per funds of­fer a num­ber of op­tions that range from low to high risk, so make sure you’re com­fort­able with where your money is in­vested.

They also vary sig­nif­i­cantly in cost, and gen­er­ally you’ll find the fees for more com­plex, riskier in­vest­ments will be higher to jus­tify the higher ex­pected re­turns.

In a con­fus­ing twist, you’ll also see a “unit value” and “unit price” next to the bal­ance of your in­vest­ments.

That’s be­cause su­per funds pool your money to­gether with other in­vestors be­fore they in­vest it in the mar­ket. This pool of money is di­vided up into units, which you’re al­lo­cated based on how much money you have in­vested.

Com­par­i­son web­sites such as www.Cans­tar.com.au, www.morn­ingstar.com.au, www.chantwest.com.au and www.su­per­rat­ings.com.au look at fund per­for­mance and fees and of­fer a good bench­mark.

CHECK THOSE PESKY FEES

As the Pro­duc­tiv­ity Com­mis­sion re­port showed, high fees can have a huge im­pact on how well your fund per­forms over the long term.

For some rea­son, most funds will hide this in­for­ma­tion af­ter a long list of the trans­ac­tions on your ac­count.

All funds will charge some com­bi­na­tion of an ad­min­is­tra­tion fee and an in­vest­ment man­age­ment fee (some­times called an ICR or MER). You may also be pay­ing a fee to an ad­viser, and legacy fees like a con­tri­bu­tion fee.

At this stage it makes sense to com­pare what you’re pay­ing against other funds in the mar­ket (it’s a good idea to cal­cu­late the to­tal fees you pay as a per­cent­age of your bal­ance).

When it comes to fees, the lower the bet­ter. As a rule of thumb you shouldn’t be pay­ing more than 1 per cent in fees.

DO YOU WANT IN­SUR­ANCE COVER?

Most su­per funds pro­vide some level of in­sur­ance for their mem­bers au­to­mat­i­cally, known as de­fault cover. This is gen­er­ally any com­bi­na­tion of life, dis­abil­ity and in­come pro­tec­tion in­sur­ance.

It’s im­por­tant to re­view this cover on your state­ment.

Check the ben­e­fits avail­able to you and re­view the pre­mi­ums you’re pay­ing to en­sure it’s ap­pro­pri­ate for you.

MAKE A BEN­E­FI­CIARY NOM­I­NA­TION

If you don’t make a ben­e­fi­ciary nom­i­na­tion, your su­per fund will de­cide how your ac­count is dis­trib­uted in the event of your death, so en­sure you nom­i­nate where you’d like it to go.

And fi­nally, re­view your per­sonal de­tails to make sure your fund has up-to-date con­tact de­tails on file.

That way you won’t risk “los­ing” a fund down the track.

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