Superannuation or super is likely to be one of your largest assets. It starts from the time you started working so it’s worth paying attention sooner rather than later because it makes a big difference to what your balance is at retirement.
Here are 4 tips to keep on top of you super:
- Consider contributing a bit more to your super
- Check your investment options
- Review any insurance cover you might have or need
- Nominate your beneficiaries.
Let’s break these down for you a little more.
Contributing more to your Super
We know that super is money set aside while you’re working to live off when you retire.
If you’re eligible, a percentage of your income will be paid into your super by your employer.
The Superannuation Guarantee (SG) is the percentage amount of your salary that all employers are required to pay into your super fund. It currently sits at 10.5% a year before tax, but is scheduled to increase 0.5% each year until it reaches 12% on 1 July 2025.
The SG is on top of what you may choose to contribute yourself – separate super voluntary contributions.
Super grows with compound interest, it’s a very big part of how super works. The positive investment returns goes back into super and continues to grow. So, the earlier you start, the longer your money will have to accumulate compound returns and grow increasing in super balance. If you even add $20 per week for a decade, after 10 years you will see a substantial increase.
You can think of your super as a savings account – but you can’t access the money until you reach your preservation age and retire – or are working less than 10 hours a week. For most people that will be from the age of 60 years onwards, depending on when you were born.
There are certain conditions on which you can access your super early: First Home Super Saver Scheme; severe financial hardship such as during COVID; compassionate grounds; terminal illness or permanent incapacity where you cannot work; or you’re permanently leaving Australia.
Check your investment options
You can generally choose from a range of investment options and assess classes. Your preference may depend on how long you plan to invest, and attitude to risk differs from person to person. There are more conservative and more high-risk options. Investigate to work out what’s best for you. A good starting point is to look at what your fund offers.
Ninety per cent of people go with the Balanced Option – which is investment in a wide variety of assets including private equity, property, and credit.
Fewer people will choose to go into each asset depending on what’s going to happen in the future and what’s happening with the market. This provides more options if you want to take a more hands-on approach. Some are higher risk and some are lower risk.
Market volatility is the frequency and magnitude of price movements up or down. You may have noticed changes in your super balance year to year. By allowing investments to recover it allows them to grow. This provides reassurance during the rough patches during market downturns and recessions.
Review any insurance
While some people have a good reason for having two super funds, consider consolidating your super if you have multiple funds. The main reason is that in having multiple super funds, you pay more in fees.
There are two ways to consolidate your super:
- Log in to your MyGov account if linked to the Australia Taxation Office (ATO) and click ‘Manage my super’, or
- Go to your Super fund to download and complete a ‘Consolidate your Super’ form.
Do some research on your insurance and other benefits before you close a super account to make sure the account you are moving into has the right features for you.
Insurance in super generally covers:
- Death cover (life insurance).
- Total and permanent disablement (TPD) – a lump sum paid to you if not able to work.
- Income protection – a monthly payment if you are sick or injured and unable to work temporarily.
There are eligibility requirements for these. Use your super fund’s tools and calculator to work out roughly what your insurance needs are.
Nominate your beneficiaries
There are two categories: binding and non-binding. Non-binding is a preference it is not legally binding.
To nominate a binding beneficiary you need to print off a form from your super fund’s website. You need to complete a form in front of two signed witnesses and send back to your fund – your nomination lasts for three years. This provides people with peace of mind in the uncertainty of death that there super will go where you want it to.
Who you can nominate to get your super:
- Your current spouse/partner
- Interdependent (caring for)
- Other financial dependents
- Your legal personal rep (to your estate but you must do a will)