Super checklist: 10 ways to save your super

SuperGuide receives hundreds of questions every week from Australians wanting to create a better life for themselves in retirement. The types of questions we receive include: how much super should my employer contribute each year, how much money is enough, how can I work out if I am in a good super fund, and, what happens to my super when I leave this earth?.

In some cases, the questions we receive from readers and SuperGuide’s coverage of a particular issue, prompts the superannuation industry and the Federal Government to review specific superannuation rules.

Due to the large number of questions and comments that we receive, we cannot answer every question individually. We do however read and acknowledge every question and comment that we receive and we aim to incorporate nearly question we receive in broader articles on particular topics, or when publicising a glaring flaw in the super laws.

We also publish Q&As that represent the most popular topics or the most significant issues facing Aussies at the moment.

Each month, we publish a free email newsletter on superannuation that covers the current issues in superannuation, the latest performance results, and plenty of tips and strategies for Australian consumers to save their super. If you haven’t subscribed to our free monthly newsletter, you can do so by clicking on the link on the right-hand side of the webpage.

This article, ’Super checklist: 10 ways to save your super’ is the first in a series of special articles that SuperGuide will be publishing, designed to help SuperGuide readers more easily access the hundreds of questions and articles that we have published on the SuperGuide website.

Continue reading to discover 10 ways to save your super.

1. Check that your super fund has your TFN

Give your tax file number (TFN) to your super fund, so your employer’s super contributions or your concessional contributions, are not hit with a tax of 46.5%, rather than the usual 15% tax.  If your super fund doesn’t have your TFN, you won’t be eligible for the super tax refund payable to Australians earning less than $37,000.

Checking that your super fund has your TFN is also essential because you cannot make non-concessional (after-tax) contributions if you super fund doesn’t have your TFN. If you can’t make a non-concessional contribution, then you can’t take advantage of the co-contributions scheme.

SuperGuide explains the importance of your TFN in the following articles:

2. Find out how many super funds you have, and update your contact details

If you lose touch with your super fund, or super funds, the Federal Government is intending to whisk away your super money within 12 months, and park it with the ATO until you eventually claim your super money. Your money will be gobbled up by consolidated revenue (that is, the Government’s cash coffers), and when you do claim your money you will receive a consumer price index adjustment but no investment earnings from the time your money became lost.

The upside to this scenario, however, is that the ATO doesn’t charge fees for holding your super cash (or for using your super cash, until you discover you have lost it). Check out what you can do to save your potentially lost super in the following SuperGuide articles:

3. Consider combining your super accounts to reduce how much you pay in fees

The number of super fund accounts that exist in Australia far exceed the number of Australians of working age. According to APRA, there are, on average, nearly 3 superannuation accounts per Australian of working age. You may even have more than 3 super accounts floating about in super land.

For every super fund account that you have, you can expect to be charged investment and administration fees. Administration fees are usually a flat rate per super account, which means that you may be paying double, triple, quadruple or even more than what you need to pay in administration fees, depending on how many super accounts that you have.

Your super funds may also be deducting life insurance premiums automatically from every super fund account that you hold, which means a lot of money may be deducted unnecessarily if you hold more than one super account. An easy step to cut costs is to combine super fund accounts.

Check out the SuperGuide articles below for more information:

4. Check that your employer is making compulsory super contributions (Superannuation Guarantee) for you, and that the amount is correct

If you are an employee, and you earn at least $450 each month, then in most cases your employer must make superannuation contributions on your behalf. The superannuation amount is currently the equivalent of 9% of what you earn (that is, ordinary times earnings), although the 9% can mean different things depending on whether your earnings are ‘$X plus super’ or ‘$X including super’.

Your employer must pay your super contributions at least quarterly into your chosen super fund, or into a super fund stipulated in an industrial award or agreement. From 1 July 2013, the SG rate increases to 9.25%, and then continues to increase over time until it reaches 12% from July 2019.

The following SuperGuide articles explain how the Superannuation Guarantee rules work, and what you can do to check whether your SG has been paid by your employer:

5. Check your life insurance cover in your super fund

Working out how much a superannuation fund charges for life insurance for an individual can be difficult. The insurance premium you can expect to pay may depend on your age, your gender, your profession or occupation, your smoking habits and probably your current state of health.

Superannuation funds must provide minimum insurance coverage (without a medical examination) if the super fund automatically receives super contributions on behalf of an individual. In other words, if you do not actively choose your super fund, then the super fund chosen by your employer or set out in your industrial award or agreement, must provide minimum life insurance cover.

For more information on life insurance and other types of insurance available within a super fund check out the following SuperGuide articles:

6. Ask yourself, how much super do I need for my life in retirement?

If you know your savings target, and what you need to get there, then you can do something about your retirement plans and you can hopefully worry less about your life in retirement.

You can use Trish Power’s six-step retirement plan to work out your own savings target, or you can refer to other handy articles on the SuperGuide website for guidance. You can work out how much super you need to finance a modest or comfortable life in retirement, or even finance a luxurious life in retirement. You can also calculate how many years you need to plan for in retirement, or more specifically your average life expectancy. (In the next article in this series, to be published in December 2012, you can discover ways to boost your super savings.)

Check out the following SuperGuide articles for more information on working out how much money is enough:

7. Review your super fund

Is your current superannuation fund good enough to deliver (in financial terms) the retirement lifestyle that you have in mind? Are the super fees competitive, does the super fund deliver investment returns that are comparable to other super funds, and does your super fund provide cost-effective insurance cover (if relevant)?

If your super fund disappoints on any of these criteria, then you may be considering changing super funds. The following SuperGuide articles can help you compare your super fund against the top performers, and what you need to do if you do decide to change super funds:

8. Monitor your super fund’s investment returns

Regularly monitoring your fund’s investment returns against what the other super funds are delivering over the longer term can help you determine if your super fund is good enough, or whether the investment option that you have chosen within your super fund is the most appropriate investment option.

Every month, SuperGuide publishes the latest returns, on average, delivered by the super industry across the main investment options offered by major super funds. We also publish the list of the top-performing super funds for the year, quarter or month. Check out the following SuperGuide articles:

9. Review your investment option, and change if necessary

Regularly review and monitor the investment option that your superannuation savings are invested in, on your behalf, by your super fund. If you have not chosen your super fund, or have not actively chosen your investment option, then your super savings will be sitting in the default investment option.

Around 80% of all superannuation money is invested via the default investment option which is typically a balanced option (holding up to 60% in growth assets such as shares and listed property) or possibly a growth option (holding up to 80% in growth assets). Some Australians choose more risky investment options such as high growth, or less risky options such as conservative options.

For more information on investment options and the varying performance figures, check out the following SuperGuide articles:

10. Identify your nominated beneficiaries: who’ll receive your super if you die

You can leave your superannuation benefits to anyone who is considered a dependant under the superannuation laws, or you can leave your super to your estate, and then pay those super monies to anyone, as part of your estate.

You can nominate beneficiaries (in the event of your death) by completing a special form supplied by your super fund. Your spouse, your children and anyone else considered financially dependent on you can be considered ‘dependants under the super laws’.

The tricky aspect to death benefits is that some of your superannuation dependants will receive tax-free death benefits while others will have to pay tax on those death benefits. Why? Well, your spouse and financially dependent adult children are considered dependants under both the super laws and tax laws, so they can expect tax-free death benefits. Financially independent children are dependants under super laws but treated as non-dependants under tax laws which means they may pay tax on super death benefits.

Death benefits can be a complicated area. The following SuperGuide articles provide more information on the topic:

The list above provides you with some tools to help you save your superannuation. The next article in this series will explore ways that you can boost your super savings (to be published in December 2012).

© Copyright Trish Power 2009-2014

Copyright for this article belongs to Trish Power, and cannot be reproduced without express and specific consent.

IMPORTANT: SuperGuide does not provide financial advice. SuperGuide does not answer all questions posted in the comments section. SuperGuide may use your question or comment, or use questions from several readers, as the basis for an article topic that we publish on the SuperGuide website. We will not disclose names or personal information in these articles. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Readers need to seek independent advice about their personal circumstances.

Comments

  1. Hi there,

    I am travelling overseas for a few years and am wondering if I can freeze my super accounts (2) so that I don’t incur any fees. Is this possible? What advice can you give me please?

    I am 31 and am far from retiring.

    Regards
    Kylie

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