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046: Reviewing your superannuation
441 Plays4 years ago
This episode gives you Mia and Dinah’s top hacks for reviewing your superannuation and related insurances.
It’s easy to slip into a ‘set and forget’ mode for superannuation. Almost 70% of Australians don’t make an active choice and opt for their employer’s default superannuation fund plus there is more than $17 billion in lost super across 6 million accounts. Given that around 10% of your income is going there, it’s important not to ignore it. If you are a woman, engaging with your superannuation is particularly important: more than 80% of women are currently retiring with insufficient superannuation savings to fund a comfortable lifestyle, with average retirement balances of $80,000 less than the average for men.
Mia and Dinah talk about using retirement calculators to motivate you to get more engaged with your superannuation.
Mia and Dinah also discuss good times to review your superannuation and talk through some of the financial fine print and jargon including:
- types of superannuation funds: accumulation funds, defined benefit funds, self-managed superannuation funds
- various investment option types: growth, balanced, conservative, ethical – and the things you should consider when deciding which option might be right for you
- types of insurance and why insurance through superannuation might be better value for you
- nominating beneficiaries to ensure your superannuation and insurance benefits would be distributed in accordance with your wishes if you pass away
They walk through the key steps in reviewing your superannuation and assessing if you may want to switch including:
- checking for lost super – log into MyGov and look in the ATO section/Super tab – any super accounts in your name will be listed, including those you’ve lost or forgotten – you can then choose to consolidate them into one account to save on fees
- reviewing your current fund to understand your current balance, investment options, fees and insurance coverage and premiums
- looking at fund performance over a 5-10 year period
- comparing your fund’s fees and performance on comparator sites such as canstar.com.au, RateCity.com.au and Morningstar.com.au
- calling your current fund and possible new funds before switching to ensure you understand the differences in insurance coverage.
If you decide to switch funds the key step are:
- setup your new superannuation fund first
- advise your employer of the new fund details
- ensure your employer is making contributions to the new fund
- complete paperwork with your new fund to rollover your old fund into your new fund
Don’t forget to set up your online access and save all the details into your password manager.
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Episode 30: Sorting out Life Insurance
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Transcript
Introduction to Savings and Tools
00:00:00
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00:00:30
Speaker
This is Life Admin Life Hacks, a podcast that gives you techniques, tips, and tools to tackle your life admin more efficiently, to save you time, your money, and improve your household harmony. I'm Dinah Rae Roberts, an operations manager who finished high school the year that Super was born in Australia. Does that make me a Super Native? I'm Mia Northrop.
00:00:52
Speaker
researcher and writer you can't wait to retire only another 20 years to go hello and welcome to life and in life hacks
Engaging with the Audience
00:01:02
Speaker
Before we get into it today, we want to thank our latest reviewers. Hello to Tiff. He said, Dina and Mia make a great pair offering words of wisdom and practical solutions to modern life. As a parent, I can totally relate. The juggle is real. The mental load is definitely real. And all those digital photos that need filing.
00:01:23
Speaker
We feel you too, thank you. If you have got some value out of the show so far, please leave a rating or review on Apple Podcasts. It really does help others find us. We also want to do a shout out to sign up to our new monthly momentum newsletter. Head to lifeadminlifehacks.com where you'll be able to find sign up forms for this newsletter. And each month we feature seasonal tasks you should be focusing on.
00:01:49
Speaker
getting new apps or resources we found out there that will help you optimize or minimize your life admin and general motivation to keep going to reduce a life admin in your life.
Understanding Superannuation
00:02:01
Speaker
Today, we're going to talk about superannuation meads. It's a pretty exciting topic, isn't it? And we know that almost 70% of Australians actually don't choose. They just sign up to their employer's default superannuation fund. So it's clearly a topic that lots of people ignore. Well, we're episode 46. Let's take it as 46 episodes to get to superannuation, and it's pretty important.
00:02:26
Speaker
But yeah, as we said, it's one of those things that is quite easy to set and forget. Yeah, and there's more than $17 billion in loss super across 6 million accounts waiting to be found. So it's definitely something you need to focus on because there might be money out there that you don't even know that you should be looking for. Yeah. And obviously super isn't just the amount of money that you get when you retire.
00:02:50
Speaker
Yeah, so insurance can also be a really important part of super. So life insurance, total and permanent disability insurance and income protection insurance are all things that can be included in your super. And it's important to be confident that you've got the right cover for those important areas. So about 10% of your income goes towards super. So this is something that we need to think about. If 10% of your income was going elsewhere, you'd be paying attention.
00:03:18
Speaker
particularly if you're a woman, because 80% of women currently retire with insufficient superannuation for a comfortable lifestyle, red flags. Usually women are retiring, on average, women are retiring with about $80,000 less than men. And if you need some more motivation to get engaged with your super, you might want to check out a retirement tracker. We found a good one on superguru.com
Gender Disparity in Retirement
00:03:43
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.au.
00:03:43
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That's run by the Association of Superannuation Funds and that gives you an easy way to estimate based on what you've currently got in your super and what your income is or how far you know what you'll have by the time you retire and how far you are away from a comfortable retirement.
00:04:00
Speaker
So the contrast there is between modest retirement and comfortable retirement. And there's some criteria they give to sort of help define what does modest look like, what does comfortable look like. And trust me, we all want to be comfortably retiring. Yeah, definitely. So reviewing your super will help you be confident that you've got the right amount and type of insurance and that you aren't duplicating insurance both inside and outside of superannuation.
00:04:27
Speaker
You can also track down any super you've lost in previous jobs. You might want to consolidate the funds so that you're not spending extra on fees and paperwork. And also have a think about your beneficiaries and make sure that whoever is going to receive your super when you die.
00:04:44
Speaker
other people that you actually want to receive it. And it's also important to make sure that the super fund that you're in isn't eating up all of your funds in fees because an extra 0.5% can add up to $100,000 in your retirement. So making sure that you've got a superannuation fund that's got good returns and low fees is also really important. So data when is a good time.
00:05:06
Speaker
So be checking your super. Obviously, when you start a new job, you kind of get that prompt because you get the paperwork that you need to fill out where your superannuation contributions are going to go. But there are other really good times for review. So it might be when your annual statement arrives because all superannuation funds
00:05:23
Speaker
send you one after the end of the financial year. You might also want to do it when you're going on parental leave or taking some time away from the workforce because there's particular things you should look out for with insurance when you're taking some time away from work. And also you might want to think about it before the end of the financial year because
00:05:42
Speaker
If you're starting to think about adding more to your super, you can actually get some tax deductions. So there might be some tax benefits to reviewing your super say in April or May. Making sure you do it well in advance of the end of the financial year because it often takes a couple of weeks if you do want to make contributions. And obviously also if your circumstances change, you get married, you get separated, divorced, or have children. Other good life events to kind of really start to think about, particularly insurances.
Types of Super Funds
00:06:11
Speaker
Yeah. As someone who got separated a few years ago, I'm thinking about that comfortable time and it's looking very different to how, you know, I thought about it a few years ago and obviously changes with beneficiaries. Yep. All right. So super is one of those areas where there is a bit of financial fine print.
00:06:29
Speaker
There's a lot of jargon, it can get confusing. You may have heard about defined or there's retail super funds out there and retail super funds, they're either defined benefit funds or they're accumulation funds. Most super funds are accumulation funds, but in government or higher education, a few specific sectors
00:06:48
Speaker
there might be defined benefit funds. And in this scenario, your retirement benefit is actually determined by a formula, which is linked to your average salary before you retire. So it's quite, it operates quite differently. A lot of these funds are closed to new members. So if you're thinking about leaving one, if you're in one, get some professional advice from a financial planner, because some funds are very generous. They're kind of set up when Super was first invented,
00:07:16
Speaker
And they don't make them like that anymore. So be aware that if you leave, you can't rejoin. Yeah. And you might also have heard of people talking about self-managed super funds, which is a super fund that you manage yourself.
00:07:33
Speaker
Well, I think that, ironically, you wouldn't be able to manage it yourself unless you've got lots of technical capabilities. Because you have to do a lot, you have to audit it, you have to have some advice around legal structure and regulatory compliance. So although I think that some people can be tempted to think this is for them,
00:07:51
Speaker
The evidence says they're really only worthwhile for very high net worth individuals that have large amounts to invest and that they can get benefits from tax structuring and investments. But even then, it is worth noting that historically self-managed super funds have not outperformed the mainstream fund. So I don't think that it's probably the avenue to go down if you're thinking that you're going to somehow be professional investment advisors who run most of the other super funds.
00:08:18
Speaker
One thing everybody needs to understand with Super are the investment options. Talk us through what this means for us.
00:08:27
Speaker
Yeah, so one of the choices that you make in most superannuation funds is what you're going to invest in because your superannuation fund invests your money for you.
Investment Choices in Super Funds
00:08:36
Speaker
And they usually let you choose from a range of investment options, usually from conservative all the way up to growth or high growth. And that's something where you really need to decide what's important to you and have a think about what might be appropriate for your age,
00:08:51
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how long before you plan to retire and you need to access your funds, how comfortable you are with the investment risk. So, you know, if you're really going to be looking at your super balance, you might not want to take some of the more risky options if that's going to make you feel anxious. And also, you know, how important ethical investment is to you because increasingly ethical investment options are important. And so before you start to compare your superannuation funds performance to others,
00:09:19
Speaker
you really need to understand which is the investment option that you're trying to compare rather than just trying to compare the performance of the fund overall. Yeah. And it really comes down to how comfortable you are with risk, right? So if you're close to retirement age, you probably want a low risk option because you don't want to potentially see that balance plummet and not have another sort of 10 years for it to correct. Whereas if you're younger and you might have a higher risk profile, you might go for a growth option,
00:09:49
Speaker
where there might be volatility over the short term, but in the long run, you're going to get better returns. And the ethical funds, I mean, there's more and more ethical funds right now coming on board. And really, these are scenarios where the company is aiming to screen out
00:10:06
Speaker
Investing in companies that don't mean certain environmental or social government standards that might be showing away from mining and coal and might be focused on corporations that are doing the right thing by society and
Insurance via Super Funds
00:10:20
Speaker
the environment.
00:10:21
Speaker
So we also talked about it already, but maybe let's dig into it a bit more about the insurance that's available within super because as we said, superannuation isn't just for retirement. Okay. So we did a deep dive actually in episode 30 about sorting out life insurance, but both life insurance, total and permanent disability, often called TPD and income protection insurance are available alongside your superannuation or as part of your superannuation.
00:10:51
Speaker
So the insurances that you get within Super can often be really good value. There's some reasons around that. The first one is that the Superfunds don't pay GST, which you would pay if you get your insurance outside the Superfund. And also they get kind of group discounts because they're insuring a large number of people. So they can often get a much better deal than you can get yourself if you approach a life insurer as a single retail customer. So it's definitely worth considering
00:11:18
Speaker
whether you want to put your insurance through your superannuation or whether you want to arrange it for yourself outside super. And when you say it's good value, we're talking about the premiums you pay each year, right? Yeah. So the premiums and often even the terms and conditions can also be kind of good because you're on a group basis rather than on an individual basis. Yeah. Gotcha. Okay. And if you want further details, jump onto episode 30 where we get into the nitty gritty.
00:11:42
Speaker
Yeah, so I think in episode 30, we really only talked about, I think we talked about all of them, but life insurance pays a lump sum to your beneficiaries when you die. Total and permanent disability insurance, that pays you a benefit if you become seriously disabled and unlikely to be able to work again.
00:11:59
Speaker
and income protection insurance actually pays you like a regular income for a specified period if you can't work due to temporary disability or illness. So all of those things become really important once you've had kids and you're really thinking about making sure that you can support them if something happened to you. Yeah, or if you have, you know, if you're carrying some kind of debt, if you have a mortgage, for some reason you can't work, even if it's like, you know, for a year you can't work because you're ill, or if you have an accident and you can't work,
00:12:28
Speaker
for the duration, then you think about how am I going to pay off that debt? So, these insurances are crucial. So, Mia, let's chat through how you might take stock of your super and the things that you might want to have
Managing Super Accounts
00:12:40
Speaker
a look at. Yeah. Well, I guess the place to start is to track down any lost super you have. So, if you've changed jobs over time and you didn't consolidate your super each time you switched,
00:12:52
Speaker
then you might have multiple superannuation accounts, which means multiple sets of fees, multiple sets of paperwork. And it makes a lot more financial sense to consolidate these so you aren't paying extra fees. And so you're reaping the benefits of the investments and the returns on a bigger lump sum. So head to mygov.gov.au. Yeah, the mygov.co.au and look in the ATO section. Yep. Well, go to the ATO section.
00:13:21
Speaker
head to the super tab. I think you're pretty much putting in your tax file number and it pulls back things. Yeah. So you will have already, your tax file number will already be linked in the ATR. So yeah, basically then when you log in, you'll see any super accounts that are in your name, including any that you might not know about. So yeah, you might get a little happy surprise there. And you can actually then even write there in that if there's some that you find it like really small balances, you can actually choose to consolidate them right there from within my govern, they'll do all the work for you. So they've,
00:13:51
Speaker
made it super easy. So if there's some small... Super easy? Super easy. No pun intended. Yeah. Yeah. Yeah. Regardless of whether you do that consolidation in MyGov or elsewhere, it is very much like you press a button and the onus is on the superannuation funds to make it happen. Yeah. It's really much easier than it used to be years ago. Okay. So step one,
00:14:10
Speaker
because check and consolidate. Step two. Yeah. So I think if you're thinking about am I, is my super fund the right one for me? It's important to first, as we talked about before, understand what your investment options are. So you might want to look at what you're currently invested in, but also go to your superannuation funds website and see what other options they might have, because maybe it's actually just simply a matter of switching investment options within the existing super fund rather than needing to switch to a new super fund. Yeah.
00:14:39
Speaker
And they, you know, if you haven't looked for some time, you might find that, you know, when you first set it up, they had balanced, conservative and growth. And now there's all sorts of ethical and lifecycle and new types of investment options. So jump on the website and see what's now available to you.
00:14:57
Speaker
And you're also going to want to understand a bit more about, you know, what your balance is, what fees you're paying and what insurances you've already got within your current super fund and what the performance has been of your super fund over the last five years. So really the experts recommend looking over a five to 10 year period rather than just looking at a short term horizon when you're talking about investment returns.
Comparing Super Funds
00:15:20
Speaker
Yeah. And so note this down.
00:15:22
Speaker
And then we're going to do a little bit of comparison shopping. So there are a few financial websites out there that we would recommend in terms of being user friendly and comprehensive. So good old canstar.com.au, there's ratesity.com.au. And if you want something that's probably a little bit more sophisticated and detailed and you really want to dive into some detail, get into morningstar.com.au.
00:15:46
Speaker
Yeah. So on Canstar and Rate City, you can just enter in your age and your current super balance, and then you can sort the results according to fund performance or fees, depending on your primary goal. I think as with all comparison sites, just be aware of the advertising promotions at the top of the list and make sure you look a bit further down to see which of the highest performing ones based on your super balance.
00:16:12
Speaker
Essentially, we're just looking for funds that look appealing. You'll have to head to the websites usually to get the details. The flags to switch are really that you're finding a fund that is performing better over the last five years and whose fees are ideally lower and then you can decide to switch.
00:16:32
Speaker
Yeah, so the only real tricky area here is when it comes to insurance. So making sure that when you're looking at the other options, you're understanding the insurance options of the new fund. And so that's where you might even need to make a phone call, both to your current fund and if there's one you're thinking of switching to, giving them a call to understand what the differences are in the insurance coverage to make sure that you're not forgoing your insurance coverage to save some fees. Yeah, okay. So if you do decide to switch
00:17:02
Speaker
you'll want to set up the new account first. So I guess you can't really close the other one anyway.
00:17:09
Speaker
No, so you just need to set up the new account first. And then... Yeah, and I think the most important thing is to make sure that you've given those details to your employer. And I would recommend waiting until your first pay has gone in there so you know it's all working. Yep. And then you can fill in a consolidation form with your new Superfund and they'll take care of the rollover and the closure of your old fund if that's what you choose to do. Yep.
00:17:33
Speaker
And then obviously you'll be probably nominating your beneficiaries again, which you might want to make sure that they're set or update them. And usually you can do that if not when you're setting up the new account, then off into the My Account section and fill out that form, that nomination form. Yeah, so I think once you've actually made the decision, the process to implement is actually reasonably easy. But it's also important to make sure that then you set that all up
00:17:57
Speaker
Think about registering for the new Superfunds, my account area, and making sure you keep all of your passwords and your password manager. Opting for paperless communications is a really good idea. Some of the Superfunds now have apps, so you might want to download the apps so you can get a little bit more engaged with your Super. I've actually got Australian Super, you can even make extra contributions right there from the app. Pretty simple once you've made the decision.
00:18:23
Speaker
Okay, so given that we're coming up towards the end of this financial year, this listener might be your time for thinking about reviewing your super and seeing if it's worth making some extra contributions or switching either investment options or the funds.
Final Tips for Superannuation Management
00:18:38
Speaker
And we hope these hacks will make it easier for you. Our top hacks are
00:18:42
Speaker
Head off to the retirement tracker on superguru.com.au to see what you need for a modest versus comfortable retirement. Then head along to mygov.gov.au to see if you have any lost super waiting for you. And finally, go to CanStyle or Rate City to look at the comparison options to see how your super fun compares to others in the market.
00:19:06
Speaker
If you'd like to join us on our life admin journey, please head to our Facebook page, life admin life hacks to follow us and share your thoughts on what we're doing and feel free to post any comments or certainly post suggestions that we might be able to use. We hope to see you there. Thanks for listening. Show notes for this episode are available at life admin lifehacks.com. If you're a fan, please subscribe and share the love and tell a friend or review us in your podcasting app.
00:19:36
Speaker
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