By Graeme Colley
Executive Manager, SMSF Technical & Private Wealth
Why not give yourself a 'super' gift this Christmas by making some simple changes to your superannuation which may help provide better investment returns and maybe reduce costs.
Some things that could make a real difference to your retirement savings include:
Finding a super fund that suits you may sound straightforward, but most employees end up in their employer's default super fund option. This means that each time there's a change of employment, they become members of a new fund and may belong to many super funds. Don't forget that most of us can choose fund election so your employer will contribute to your selected fund.
The legislation was passed in November 2021 so that anyone new to superannuation has the opportunity of choosing a stapled fund. A stapled fund means that your employer must check with the ATO to see whether you have already chosen a stapled fund each time you change employment. If that's the case, then the employer's contribution must be made to the chosen fund unless you decide they should be made to another fund.
The types of funds that can be chosen include industry funds, retail funds, public sector funds, corporate funds, and even self-managed superannuation funds. However, membership of the fund can be restricted to employees of a particular industry, company, or government. If you are thinking of selecting a fund, see whether you are eligible to become a member and, if you are, complete a choice of fund form which should be provided to your employer.
In deciding whether a particular type of superannuation fund is suitable for you, consider your investment goals and risk profile, the investment options available, fees, fund performance and whether insurance is available. The MoneySmart website [1], provided by the Australian Securities and Investments Commission (ASIC), suggests a 1% difference in fees now could contribute to as much as a 20% difference in the benefit payable in 30 years. The ATO also has a comparison tool to help you compare MySuper products and choose whether a particular fund meets your needs.
If you have more than one super fund, it is possible to bring multiple super accounts together into one fund. This can reduce costs and help boost the income earned on your super balance. The first thing to do is to find out the details of the funds you belong to, including your membership details. The easiest way to consolidate super funds is to use your MyGov [2] account, which includes a service offered by the ATO to help people find their super accounts.
Before deciding to combine super into one account, check whether it makes sense to do so and whether it's possible to replace or transfer current insurance cover, which may 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 you with better value.
Extra contributions to super can be tax-effective, and the earlier you make additional contributions, the greater the potential benefit from compounding returns. This would allow more time for benefits to grow; for example, a relatively small increase in contributions can make a real difference to the amount accumulated by the time you retire.
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 $56,112 in adjusted taxable income for the 2021-22 financial year can be eligible for a co-contribution of up to $500. Still, they will need to make a non-concessional contribution of up to $1,000 to their super fund.
In addition to these changes, other ways can be included when reviewing your current superannuation, such as setting your retirement goals, reviewing the investment mix in the fund, or the insurance cover provided. These simple changes should help boost the super amount available for retirement over the long term.
[1] https://moneysmart.gov.au/
[2] https://my.gov.au/
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