The disappointing outcome of the Super mistake in disinterest in this asset is avoidable. We urge attention to your Super on a regular basis.
One of the most forward-thinking financial reforms of the last century was the establishment of the compulsory superannuation regime. Under this regime, the most significant financial asset most Australians will accumulate during their working life, is their superannuation account. The unfortunate accompanying disservice was the creation of default superannuation structures. These structures place the obligation for investing the accumulating wealth in the hands of trustees. Consequently, the account holders have come to take little interest in their investment.
This article deals with some matters that you should be on the lookout for when your annual member statement is received. It also deals with why an active relationship with a financial adviser in this space will benefit you.
Disinterest – a Super mistake
Disinterest in superannuation account performance and strategic management of its opportunities is a Super mistake. Superannuation is at the one time, a tax-effective investment platform; and a medium- to long-term investment vehicle. Advised investors will be aware that more risk can be taken when longer investment terms are available.
The key matters for consideration in your superannuation account, are –
- The level of contributions made each year (and their frequency of crediting);
- The investment portfolio structure (reflecting your investor risk profile, your financial goals for retirement, and the term until you can access these funds);
- The performance of the investment strategy employed (net of the fees incurred to implement that strategy); and
- Regular review of the contributions and the investment strategy for relevance to your personal financial needs and circumstances.
Annual member statement
Depending on your superannuation account trustee, your obligatory member statement should be emailed/posted to you within the next few months.
Some of the features that will appear on most superannuation fund annual member statements are –
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Account Balances:
Opening and Closing balances specifically. (Consider how the change between the two is impacted by: the contributions made; the investment earnings; the expenses paid. Failure of employers to contribute in time, delays investment opportunity. Inappropriate investment strategy will impact the earnings of the investment. Expenses such as trustee administration costs, insurance premiums and investment manager costs will need to be considered.)
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Fees and Charges:
This is an area in which not all superannuation trustees are as transparent. Some don’t detail investment manager costs for instance; and some may charge a fee for making an investment ‘switch’. In ‘comparing the pair’ (your fund against the ‘average’ fund), remember that levels of service and personal relevance vary dramatically. Consult with a financial adviser if you find the level of these costs burdensome and/ or confusing.
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Insurance cover:
This is a very little understood element in superannuation accounts, particularly when default insurance cover is provided. In broad terms, there are three types of insurance that a superannuation trustee must consider for members under their ‘care’. They are
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- Life (Death) Insurance: where the benefit is paid to the Trustee on the death of the member,
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- Total and Permanent Disability Insurance: where the benefit is paid to the Trustee as owner of the policy. The Trustee submits the claim after a prolonged period of incapacity of the member. They pass the appropriate benefit on to the member in compliance with SIS legislation and the terms of the policy.
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- Salary Continuance (Income Protection) Insurance – where the benefit is paid for a period of temporary disablement. Again, payment passes through the Trustee to the member if the provisions of the Superannuation Industry Supervision Legislation are met.
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Transaction Details:
Some superannuation trustees include itemised transaction information with their annual member statements. Others make this information available on the member’s portal on their website. It is important to ensure that your employer’s contributions, and your personal ones, are received on time, and receipted promptly. Any questions or concerns in this regard should be relayed to your financial adviser, or to the Trustee directly.
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Beneficiary Nomination:
this is another of those little understood areas of superannuation. Do you know where or to whom you superannuation death benefits will be paid? This can be a tricky area of superannuation and testamentary law. You can influence the decision, or indeed bind the Trustee to pay in a particular way. This can be achieved with lodgement to the Trustee of a valid beneficiary nomination – either a discretionary, or a binding nomination.
Your intentions should be influenced by the prospective tax consequences of your nomination, especially if your Estate Plan is seeking to provide a level of equality.
How to manage your Super to avoid mistakes
Apart from doing as much research as you can on the various matters that are at play in your financial world – seek advice. Advice from a qualified, experienced professional adviser such as our team at Continuum Financial Planners Pty Ltd, will help keep your mind at ease and guide you toward achieving your goals. You can contact us by phone (on 07-3421 3456), or go directly to Book A Meeting with one of our advisers.
(This article was posted in August 2024. It may occasionally be refreshed/ updated.)
