The beginning of a new year is often a good time for individuals to reflect on the past 12 months and to review and focus on their superannuation goals for the year ahead. Taking a closer look at one’s superannuation can make a significant difference with a small change in the present, which could result in beneficial outcomes in the long term. So, let’s think about the future and the positive changes that can be made to a super fund.
Three things that could make a real difference include:
1. Choosing the ‘right’ type of super fund.
2. Consolidating super funds.
3. Making extra super contributions.
The ’right’ super fund
Finding a super fund to suit an individual might sound straightforward, but the majority of people tend to go with their employer’s default super fund option. According to the Productivity Commission report into the efficiency and competitiveness of superannuation in Australia, around two-thirds of new entrants to the workplace end up in the default superannuation fund option provided by their employer1. However, the encouraging news is that people have been taking a greater interest in what’s happening with their superannuation and making informed decisions about their super investment options.
In addition to assessing an individual’s investment goals and risk profile, when choosing a super fund, a person should also consider the investment options, fees being paid, the performance of the fund and insurance.
Consolidating super
Many individuals have one than one super fund as some people end up with a different super fund for every job they’ve had over the years. It is possible to bring multiple super accounts together into the one fund, which can reduce costs and help boost the income earned on the super balance. The first thing an individual should do is to find out the names of the funds which they may have superannuation in. The easiest way to consolidate super funds is for an individual to use their MyGov2 account, which includes a service offered by the ATO to help people find their super accounts.
Before deciding to combine super into one account, individuals should check to see whether it makes sense to do so, and whether it’s possible to replace or transfer current insurance cover, which may potentially be lost when transferring benefits to a new fund. Also, keep an eye on the costs, risks and tax implications from consolidating super to ensure the transfer provides better value.
Make extra contributions
Extra contributions to super can be tax effective and the earlier an individual makes additional contributions, the greater the potential benefit from compounding returns. This can occur when individuals allow extra time for benefits to grow, for example over 30 years, a relatively small increase in contributions which can potentially make a real difference to the amount accumulated at retirement.
In addition to the benefit of making additional contributions, it’s also possible for the government to make co-contributions to super for individuals who qualify. People earning up to $54,837 in adjusted taxable income in 2020-21 financial year3 can qualify for a co-contribution of up to $500, but they will need to make a non-concessional contribution to their super fund.
But there’s more
In addition to these changes, there are other ways that can be included when reviewing your superannuation, such as setting your retirement goals, reviewing the investment mix in the fund or the insurance cover provided by the fund. These simple changes should help boost the super amount available for retirement over the long term.
To learn more, please contact on 02 9299 1500.
1Productivity Commission Inquiry Report- Superannuation: Assessing Efficiency and Competitiveness (2018), Chapter 1, Section 1.1, Page 82: https://www.pc.gov.au/inquiries/completed/superannuation/assessment/report/superannuation-assessment.pdf
2https://my.gov.au/
3https://www.ato.gov.au/Rates/Key-superannuation-rates-and-thresholds/?page=27
