SU­PER­AN­NU­A­TION CHOICES

Hills to Hawkesbury Living Magazine - - Financial - by Gail Gadd

We are bom­barded by what we should be do­ing with our su­per­an­nu­a­tion con­tri­bu­tions but re­al­is­ti­cally what choices do we have?

The first step is to check whether you can choose your fund. Some em­ploy­ers, due to in­dus­trial agree­ments, don’t have a choice. If you don’t have a choice then you are prob­a­bly in an In­dus­try Fund, Pub­lic Sec­tor Fund or a Cor­po­rate Fund.

In­dus­try Funds of­ten re­strict mem­b­ship to em­ploy­ees in a par­tic­u­lar in­dus­try. They of­fer fewer in­vest­ment al­ter­na­tives that re­tail funds and op­er­ate on a ‘not-for­profit’ ba­sis. They are gen­er­ally low-cost. How­ever, there is lit­tle to no ad­vice given and swtich­ing to a pen­sion later may mean rolling over to an­other fund. Many in­dus­try funds will in­vest in un­listed prop­erty which only is val­ued ev­ery few years. There is also the like­li­hood that mem­bers of the union will be rep­re­sented on the Boad or in man­age­ment.

Pub­lic Sec­tor Funds were cre­ated for em­ploy­ees of govern­ment de­part­ments (State and Fed­eral) and usu­ally have their own set of rules and ben­e­fits. Some of them have a ‘de­fined ben­e­fit scheme’ which can be very lu­cra­tive.

Cor­po­rate Funds are ar­ranged by an or­gan­i­sa­tio for its em­ploy­ees. Of­ten the or­gan­i­sa­tion is is rep­re­sented on the Board of Trus­tees. In other cases it may be run as part of a large re­tail or in­dus­try su­per fund. The fees are gen­er­ally low and the prof­its of run­ning the fund will be re­turned to mem­bers. Some cor­po­rate funds may also have a ‘de­fined ben­e­fit scheme’ for long-term em­ploy­ees. How­ever, com­pa­nies with fewer em­ploy­ees may find this fund an ex­pen­sive al­ter­na­tive.

My Su­per is a rel­a­tively new of­fer­ing and has gained pop­u­lar­ity as a ‘de­fault’ su­per choice be­cause it is sim­ple and low- cost. The in­vest­ment choices are lim­ited and of­ten based on your age or stage in life. Su­per­an­nu­ants may in­clude or ex­clude life in­sur­ance. How­ever, when you reach re­tire­ment you will have to look for a pen­sion fund.

Re­tail Su­per Funds are open to any­one and of­fer a vast ar­ray of in­vest­ment al­ter­na­tives. They can be help­ful if you have a large su­per bal­ance and re­quire choice as well as di­ver­sity. Here in­vestors can choose from a se­lec­tion of in­vest­ment sec­tors and fund mangers and can switch de­pend­ing on eco­nomic de­vel­op­ments. Most Re­tail Funds are mid to high­cost be­cause the in­vestin­ment or­gan­i­sa­tions need to be prof­itable to sur­vive in a com­pet­i­tive mar­ket. They will have to bear the cost of re­search to en­sure that their prod­ucts per­form as well as ad­ver­tis­ing and mar­ket­ing.

There are ben­e­fits and pit­falls to each type of fund and the best was to com­pare them is good old­fash­ioned logic. You can use one of the com­par­i­son web­sites or use the tool on the Moneysmart web­site. Cheaper and sim­pler may not suit your needs and high cost doesn’t al­ways mean high re­turns. If you have a choice, you need to choose a fund that will work for you and in all cases get­ting good ad­vice is the key.

Visit https://www.moneysmart.gov. au/tools-and-re­sources/cal­cu­la­tor­sand-apps/su­per­an­nu­a­tion-cal­cu­la­tor

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