Superannuation is changing. The Super Guarantee from your employer is about to increase for the first time in 7 years – from 9.5% to 10%. Will half a percentage point really make a difference to your life?
The Federal Government’s Your Future, Your Super package comes into effect on 1 July 2021. It will compel Australians to focus their attention on super long before retirement. Here’s what you need to know to protect your future and maximise your savings.
- Take a good hard look at your current super fund
Does your super fund offer low fees and solid investment returns? More transparency will lead to more informed consumers. By mid-year, super funds will have to justify their investment decisions to members.
All superannuation products will also face an annual performance test. Results will be available to the public on a government website. Funds that fail 2 consecutive tests will be unable to accept new members.
When reviewing your current fund’s performance, don’t judge it on a single year. Five years or more will give you a better forecast.
Do the research now and choose the best super fund to make this extra money work for you.
- Make sure you have insurance to fall back on
Are you one of 16 million underinsured Australians? Income protection, disability and life insurance can protect your family from financial stress.
The good news? You can take out these insurances through your super. The bad news? Many super funds default offering is much lower than you need.
Imagine you take out a $200,000 disability insurance policy. Your mortgage and family’s living expenses total $500,000. If you’re unable to work due to injury or illness, your loved ones will need to come up with $300,000. According to Rice Warner’s 2020, the amount of cover you need is around 8 times your family income.
Before you decide to leave a fund, it’s critical that you compare your insurance cover. You may not be able to get the same level of cover in your new fund. This is particularly true if you are 60 or over or have a pre-existing medical condition.
Sit down and work out your household’s cost of living and how much money you owe. Then compare insurance premiums to give you adequate cover for peace of mind.
- Combine your super into one fund
Armed with knowledge of the best low fee, high performing fund offering competitive insurance, it’s time to consolidate your super.
Check your super in a few simple steps through the ATO:
- Go to MyGov.com.au
- Log in or create an account
- Link your MyGov account to the ATO
- Select ‘Super’ then ‘Manage’
- If you have multiple super accounts, select ‘Transfer super’.
If you’ve decided the best fund for you is a new one, you can transfer your balance by:
- Contacting the new fund directly
- Using an ATO rollover form.
Arguably the most significant change on its way is superannuation stapling. From July, your super will follow you every time you start a new job. This will put an end to the creation of multiple super accounts and duplicate fees. The onus will be on employers to contact the ATO and find out if a new employee has an existing super fund.
It should also increase your super balance, but only if you’ve followed the steps above. If you don’t review your super fund now, you risk being stuck in an underperforming fund for life. Your superannuation is part of your ordinary earnings. Don’t hand over your hard-earned money in unnecessary fees. Take the time to protect your future – it’s in your hands.
Christina Campbell – Managing Director
Phone: +61 2 9411 4649
Email: christina@worthwhile.com.au
