Technical expert lists ‘new year’s resolutions’ for super
Following the challenges and uncertainty of 2020, a technical expert has outlined some simple changes that clients can make in relation to super that will make a positive impact this year.
SuperConcepts executive manager Graeme Colley said making small changes with superannuation can have a significant impact in the future and help them be financially prepared.
Mr Colley said there are three key areas that clients should think about including ensuring they have the right type of super fund, consolidating their super into the best performing fund, and making extra contributions.
Picking the right fund
While choosing the right super fund might sound like an obvious consideration, Mr Colley noted that the majority of people tend to go with their employer’s default option.
“According to the Productivity Commission report into the Efficiency and Competitiveness of Superannuation, around two thirds of new entrants end up in the default superannuation fund option provided by their employer,” said Mr Colley.
“However, the good news is this number is coming down as more young people take greater interest in what’s happening with their superannuation.”
When looking at different funds, Mr Colley said it is important to look closely at the fees, the performance and the insurance.
Consolidating superannuation accounts
Mr Colley noted that some people end up with a different super fund for every job they’ve had.
“It is possible to bring super together in the one fund which can reduce costs and help boost the income earned on the super balance. The first thing is to find out the names of the funds which have superannuation in it,” he explained.
“The easiest way is to use a MyGov account which includes a service offered by the ATO to help people find their super.”
Before deciding to combine super into one account, Mr Colley recommended checking to see whether it makes sense and it’s possible to replace or transfer current insurance cover, which may be lost because of 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,” he said.
Making extra contributions to super can be tax-effective, said Mr Colley, and the earlier the contributions are made, the greater the benefit from compounding returns.
“This provides more time for benefits to grow, for example, over 30 years, a relatively small increase in contributions can make a real difference to the amount received at retirement,” he said.
“In addition to the benefit of making additional contributions, it’s also possible for the government to make co-contributions to super for anyone who qualifies. People earning up to $53,847 adjusted taxable income in a year can qualify for a co-contribution of up to $500 but they will need to make a non-concessional contribution to their super fund.”
Clients he said may want to add other resolutions to their list, he said, such as setting retirement goals, reviewing the investment mix in the fund or the insurance cover provided by the fund.