In March this year Australian workers had more than $1.8 trillion stored away in superannuation funds, in part thanks to a system that generally requires employers to pay a contribution on employees’ behalf. From July 1, this required employer contribution jumped .25% to 9.5%.*
For many wage and salary earners who benefit from these compulsory super contributions, super is often something they think about once a year when their statement arrives in the mail. But we could all benefit from paying more attention to what are essentially our future funds.
According to MoneySmart Week, a not-for-profit movement set up to boost our financial literacy, one of the best ways to get a better handle on your superannuation is to consolidate your super accounts. We’re part of a group that is proud to be a key supporter of MoneySmart Week (September 1-7) set up to encourage Australians to take simple steps to make their money work harder and go further, now and well into the future. Here’s our guide to building a better financial future by consolidating your super funds.
Firstly, you may save by paying just one set of fees. Secondly, superannuation balances build on contributions and compound interest. The more you have in your best-performing fund, the higher your returns, which are rolled back into your account.
Locate Your Super
The first step is to find out where your super is located. If you have worked for multiple employers, especially since the compulsory super guarantee came into effect in 1992, then chances are you have more than one super account. If you are unsure what you have where, visit the Australian Taxation Office’s SuperSeeker service www.ato.gov.au/calculators-and-tools/superseeker/ and follow the steps to source your funds.
Pick which Fund
Most people can choose which fund their super contributions are paid into. However, if your super is paid as part of certain industrial relations agreements or you are in a defined benefit fund, you may not be able to choose. Do some research if you are unsure.
A superannuation fund is a vehicle to hold your investments, so you can generally choose investments within your super fund according to your needs and appetite for risk. Remember, superannuation assets are usually held over a very long term. So, when doing your research, look at a fund’s performance over many years, not just the recent one or two. You should also compare annual fees, including termination or exit fees, should you wish to move your funds again.
You can also manage your own super with a self-managed super fund (SMSF). These funds are broadly treated the same as any other, only you make the investment decisions. It also means you carry all of the risks and the fund’s legal responsibilities, so you need to be prepared and able to devote the necessary time and effort into making sure you manage your fund appropriately. If you’re considering an SMSF, make sure you get the advice of a qualified professional.
Do the Paperwork
There is some paperwork required to transfer your super between funds but it’s worth the effort to consolidate. You can either contact the super fund you are transferring to for the necessary forms or do it all online through the ATO’s SuperSeeker service www.ato.gov.au/calculators-and-tools/superseeker/
Your current fund will process the transfer and you will then typically receive a rollover benefits statement. Check it’s accurate and keep it with your superannuation paperwork.
If you have multiple accounts to consolidate into one, you will need to complete the same process for each.
If you start a new job, make sure you let your employer know you have a preferred super fund. Your employer will provide forms outlining which details they require. It’s also worth checking out your new employer’s preferred fund, as it may perform better than yours. Just make sure you won’t be penalised by high exit fees or if you are, make sure they are offset by gains in the long run.
* APRA – March 2014 Quarterly Superannuation Performance.
** Tax information: the information in this article does not constitute advice. As taxation legislation is complex, we recommend you speak with your financial advisor, tax advisor or contact the ATO for further details and expert advice regarding your personal circumstances.