Finding a super Superannuation
Finding a super SUPERannuation
We all know that superannuation traditionally is quite a boring topic. We can’t access our super for quite a while - so why should we care about it now? Surely, we have better things to worry about. Well, Jak Johnston from Growth Focus, busts this myth for us. We should care about our super. A lot. And the best way to do that is to do some research into your current situation, listen to our chat with Jak and review your circumstances.
Why should we care about super?
We all want to retire one day right? And we would like to do fun activities in our retirement, such as go on overseas holidays. Well, the more that we have in our super funds, the more comfortably we can live in retirement. Moreover, super is money. And as we know, money can make money, through interest and returns. Therefore, the more money we have earlier on in the game, the more our money, can make money for us. Still with me?
Here is the example Jak gave, using the Money Smart Superannuation Calculator in the podcast to demonstrate the significant difference making a few small changes to your super can have:
Jak is a 27-year-old, single person. The current retirement age is 67. He earns the median Australian income of $84,032 with employer contributions of the mandatory 9.5% SGC and currently has the median balance of $43,580 with no additional contributions. His fees are medium and investment before retirement is on ‘balanced’ (60/40 growth defensive split). He is predicted to have a super balance of $403,653. His income in retirement is predicted to be at $36,256 which will usually afford someone a ‘comfortable’ retirement.
Jak demonstrated that making small changes can result in a big difference. If he made a salary sacrifice of an extra 3% of his income, reduced his fees and set his portfolio to growth, it was predicted he would have a super balance of $574,413 ($170k difference in retirement!). This would result in $40k income per year to retire on which would afford him a different lifestyle and allow him to do more in retirement!
Can you choose your super fund?
Most likely, yes! As always, there are some exceptions. Jak discussed that usually local and state government workers are not able to choose their fund. So if you work for anyone but the government, the answer is most likely yes! This means that you do not have to go with the super that your employer suggests. If you would like to investigate this question further, read on here.
What is the difference between retail super funds, industry super funds and self-managed super funds?
The good thing with super funds is that there is something for everyone:
Retail funds: Retail funds are usually run by banks or investment companies. These funds are open to anyone to join. Retail super funds include for example: Colonial First State, Sunsuper, ING Direct.
Industry funds: The larger industry funds are open for anyone to join. However, some industry funds are restricted to employees in a certain industry. Examples of industry funds are: HOSTPLUS (tourism and hospitality), REST (retail) and CBUS (building and construction).
Self-managed super funds (SMSFs): SMSFs work like any other super fund, but the responsibility of managing them (including investment decisions and legal responsibilities) rests solely with the trustee (you). Establishing and operating an SMSF is a major financial decision and you should first discuss your personal circumstances with a qualified professional.
A little insight into what might be best for you
For those looking for control, choice and flexibility, SMSFs are suitable. For those who are cost conscious, want simplicity and low fees and want to support their industry, google industry funds. Retail funds which are developed by financial institutions and insurance companies are for people who are interested in investing and saving for their retirement. Retail super funds offer investment expertise, a wider range of investment options and personal service however can charge a commission for that service.
As Jak explained, there is not a single correct answer about which superannuation fund is best for you. It depends on your personal circumstances. Generally, a wide range of investment options is ideal - as we get older we need to be more specific with changing and tapering our risk to align with our superannuation portfolios/some investment options may not be performing so being able to switch investment options offers great flexibility
Another great point that Jak raised was that you should look for a superannuation fund that has online logins so that you can see up-to-date balances and track your super more easily. This is also important even if you have an advisor as it is a great peace of mind tool for transparency
Fund Screener and SuperRatings are two platforms you can use to compare super funds when you are doing your research. Jak mentioned that financial planners have access to software that the public doesn't which can give a comprehensive comparison as well - so keep that in mind if you are finding this whole process too overwhelming!
Consolidating your super
It is most likely that for your situation, it is best to have just one fund to avoid paying multiple sets of fees. Therefore, if you check on MyGov and you realise you have a couple of funds - be sure to consolidate them! Luckily, this can be easily done through MyGov.
What information do you need to tell your employer of the fund you want to go with?
In most cases, your employer will give you a super choice form to fill out. You will need your tax file number and superannuation fund membership number. You may also be asked for your superannuation fund ABN or product identification number. You can easily find your tax file number and superannuation fund on MyGov. Some super funds have their own super choice form which you can give to your employer as well.
In a few episodes time we will be delving deeper into Superannuation so be sure to check back in!