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January 12, 2022 Natalia Forato

Why it pays to stay on top of your Super

More than a million Aussies are in super funds that barely passed or failed the Australian Prudential Regulation Authority’s (APRA) superannuation performance test for making its member’s retirement money grow.

On 1 July 2021, the Government’s Your Future, Your Super reforms came into effect. Under the YFYS reforms, APRA is responsible for conducting an annual performance test for MySuper products. The assessment intends to hold superannuation funds to account for underperformance through greater transparency and accountability. 

The last performance test analysed 80 products that managed $900bn in retirement savings. Of those, 67 products have passed the test, while 13 products have failed it. New data shows that amongst the products that have passed the test, seven default products have only “marginally passed” APRA’s superannuation performance test, including the $67 billion industry fund Rest Super.

Bad performance means you might retire with less.

 

When was the last time you reviewed your annual statement?

 An ASFA (Australia’s superannuation industry) research revealed that 40 per cent of young Aussies have no idea what their super balance is and a further 16 per cent only have a vague idea.

 If you’re part of this crowd, it’s time to fix that! 

 

Start by taking a genuine interest in your annual statement. 

 What should I be looking for?

 

How can you ensure your company is putting money into your super fund? 

You can’t! Check your annual statement to check that the money has been paid.

What if you have multiple statements?

If you have your super in multiple funds, it might be a good idea to roll them into one to avoid paying multiple sets of fees. You can find any lost super through your ATO account on MyGov.

What are average super fund fees? 

Fees can vary considerably by fund, but on average, people in the default investment option* pay between 0.88% to 1.24% of their account balance in fees per year, depending on their age, investment type and super balance. 

 * If you didn’t choose an investment option when you opened your super fund, it will likely be in a default ‘balanced’ fund.

 Fees can have a substantial impact on your balance by the time you retire. For example, a 0.5% increase in fees could cost a full-time worker about $100,000 by the time they retire.

How can I find out what fees I’m being charged?

Your super fund must report all fees and costs in the product disclosure statement (PDS) and your annual statement. If you can’t find it, you can always give your fund a call and ask them for a copy.

What else can I do?

Making voluntary contributions in addition to those of your employer can make a big difference in your balance down the track. 

How much more should you contribute then? Well, that will depend on your current financial situation, but financial experts usually suggest 15 per cent.

Remember, your employer is already chipping in 10%, so you only need to add a further 5 per cent to reach 15 per cent in total. 

You can automate those pre-tax contributions, also known as salary sacrifice, by calling your super and asking them to email you their salary sacrifice form.

 

Your super will likely end up being one of your most significant investments, so it’s crucial to keep a close eye on your investment strategy from time to time to make sure it’s aligned with your financial goals and needs. By regularly checking your super, you’re setting yourself up for a great financial future.

If you’re not sure which investment strategy is right for you, you can get advice from one of our financial planners. Book a free chat today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent.

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