What to do for a super year

Superannuation has been under fire but don’t sweat the doomsayers just yet, writes Anthony Keane

SUPER funds bounced back in January from their late 2018 beating, but members should brace for a retirement savings rollercoaster this year.

Volatile global financial markets will combine with election uncertainty and potential rule changes flowing from the banking royal commission’s final report, to be released today.

Super specialists say fund members need to keep an eye on what’s happening, but not rush into snap decisions ahead of any rule changes.

After four consecutive months of falls, super fund returns rose in January as sharemarkets in Australia and the US climbed 4-5 per cent, but Catapult Wealth director Tony Catt said the outlook was unclear.

“There’s an underlying current that the economy is very blurry at the moment,” he said.

Labor’s plans to ban franking credit refunds from shares and reduce negative gearing and capital gains tax benefits have been a hot topic, but the uncertain make-up of a future federal parliament could halt their progress.

Mr Catt said super fund members should avoid kneejerk reactions. “A lot of these laws that have been bandied around could potentially change,” he said.

“I’m getting a lot of feedback around franking credits and negative gearing laws, but my basic response to clients is ‘don’t jump at shadows’. Stick to your strategy because a lot of water has to go under the bridge.”

MBA Financial Strategists director Darren James said the biggest risk for super was legislative risk, not financial markets.

“There will always be changes because it’s a very big pool of money,” he said.

“It’s still the best savings vehicle for retirement, bar none.

“Make sure you take advantage of the tax concessions available to you.”

There has been talk of winding back some super tax incentives, so people should make the most of them while they can. Mr James said incentives such as salary sacrifice, government co-contributions and spouse contributions could be worth a 15-50 per cent return on your money. “That’s a much bigger bang for your buck than what the markets are doing day to day,” he said. Industry Super Australia chief executive Bernie Dean said people could take a few simple steps this year to help set up their nest egg. This included “consolidating

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multiple accounts, claiming lost superannuation and choosing a fund that has outperformed over the long term”, he said.

“They should also check they’re being paid the correct amount.”

The latest available figures showed almost three million workers were short-changed with their super, Mr Dean said.

SuperRatings executive director Kirby Rappell said volatility was likely to be a feature of financial markets in the coming months.

“However, it’s important to keep a long-term perspective and recognise that super returns have been overwhelmingly positive over the past decade,” he said.