For many Australians this year’s new financial resolutions should include a review of their superannuation. The Government says we have over ten million unintended multiple accounts. As some have fixed minimum fees this means millions of dollars of duplicated fees.
Consolidating super accounts can reduce administration fees. There may also be unnecessary life insurance premiums being paid in multiple accounts. Consolidating super into a preferred fund can be done using the ATO online services or MyGov linked to the ATO.
Before rolling over and closing an account there are several things to check. The life, disability and income protection insurance are very important. Most Australians don’t have enough cover in case of death, disability or loss of income, especially with today’s massive mortgages.
Extra cover can be applied for to meet the big mortgage and family costs. It may be best to consolidate super accounts but apply for extra insurance cover in the retained one. If health isn’t perfect, two accounts can be retained for their insurance cover. The super fund pays the insurance premiums.
Other things to check include fees, performance, and the investment options available. Super funds usually offer a range of investment choices. Despite this the bulk of members don’t choose and end up in the default option. They can be quite good, but better options may be available.
Conservative funds are stable and reliable but usually earn low returns. High growth funds fluctuate widely in value but earn much higher returns long term. For most, superannuation is very long term. Higher earnings compounding for decades can make a huge difference at retirement.
Professional advisers can help select the ideal investment option for each member, review insurance and work out an affordable plan to make extra contributions, save tax and build a bigger benefit.
Employers must contribute eleven per cent of each employees’ salary into super for them, soon to rise to twelve per cent. That’s a good start, but regular extra contributions will make a major difference and allow early retirement if desired.
Extra contributions can be done as salary sacrifice via the pay office, or by personal deductible lump sum. Both produce significant tax savings. There are contribution limits that must be adhered to however.
Super fund beneficiary nominations should be checked. Super balances do not automatically go to a person’s estate on death. The fund’s trustees decide who to pay. If a beneficiary is nominated it will go to them. This is an ideal time for a super fund checkup.