If you’re thinking of a 'super' gift this Christmas then it won’t take much to make some simple changes to your superannuation to help provide improved investment returns and possibly reduce fund costs.
You can make a real difference to your retirement savings by:
1. Choosing the 'right' type of super fund,
2. Consolidating super balances that you may have in many funds,or
3. Making extra super contributions.
Finding a suitable super fund may sound straightforward, but many employees end up in their employer's default super fund option. It means that each time there's a change of employment, they may end up becoming members of a new fund and may end up belonging to many super funds. Don't forget that you may be able to choose the fund that your employer is required to contribute to. This keeps your super in one place and saves on costs.
Since November 2021 new superannuation legislation was passed for anyone new to super and provides them with 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 as stapled funds 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 website1 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. Consolidation of super can reduce costs and help boost the income earned on your super balance. The first thing to do is find out the details of the funds you are a member of and your membership details. The easiest way to consolidate super funds is to use your 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, 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.
From 1 July 2022 the government abolished the requirement to meet a work test for non-concessional contributions. This applies to anyone who is able to make non-concessional contributions right up to 28 days after the end of the month in which they reach age 75. Don’t forget that to make non-concessional contributions to super that your total super balance on 30 June in the previous financial year must be no more than $1.7 million.
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 $57,016 in adjusted taxable income for the 2022-23 financial year can be eligible for a co-contribution of up to $500. To qualify for any co-contribution you must have made a non-concessional contribution of up to $1,000 to super.
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 amount you have available for retirement over the long term.
[1] https://moneysmart.gov.au/
[2] https://my.gov.au/
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