One area that often doesn’t get enough love is your superannuation. The reality is though, your superannuation is often a significant part of what you get paid - so it's worth taking a little time to make sure it is properly sorted.
Below are seven steps to help you along.
Check your tax file number
Start simple with a bit of admin and make sure your super fund has your tax file number (TFN). If it doesn’t, you might be paying a higher rate of tax on your contributions than you need to be.
Once your fund has your TFN it’s easier to keep track of your super, move it around and do things like put in extra savings.
You can check whether your TFN is recorded by looking at your latest super statement.
Track down your long lost super
Had more than one job in the past? Chances are you may have some super sitting in a forgotten account.
Every fund will be charging you fees and quite likely deducting insurance payments too. If you have two, three, four or more super funds, you’re paying for the same thing over and over again.
It’s less of a mission than you think to consolidate. If you’ve got a myGov account, you can log in to that to view all your different super in more detail, choose which fund you want to use and roll everything else into it.
The ATO website explains how to do it and what you might need to think about.
Individual super funds will also often have an online tool that helps you look for and consolidate lost super.
For example, if you have an account with Commonwealth Bank’s Essential Super, you can simply log on to NetBank and go from there.
Weigh up salary sacrificing
Employers pay the mandatory 9.5% of your salary to your super fund before tax, but did you know many jobs also let you put in more? Known as salary sacrificing, it may help you to manage the amount of tax you pay and, over time of course, save more super.
This can be especially important if you are likely to take time out from work at some point in the future, for example for parental leave.
This is because your super contributions are taxed at 15%, which is likely to be less than the income tax rate you would pay on those earnings if you received them as part of your normal salary.
The amount of money this may save you depends on your current salary and income tax rate.
Just remember there are limits to how much you can put into your super and still receive the 15% tax rate. You can find more details about salary sacrifice at the ATO. Talk to your employer to see if they have salary sacrificing arrangements in place.
Put in a lump sum from your savings
Another option is to put in extra money after you’ve paid tax on it. While this won’t deliver the same tax benefits, it could still be a good way for you to contribute more into your super fund, depending on your circumstances.
For example, your employer may not offer the option to salary sacrifice. Or, you may not want to commit to regularly parting with an extra portion of your salary – remember, once it’s in your super, you can’t get it out again until you reach the legal age.
An alternative option could therefore be to save money in a regular, high interest savings account, such as a GoalSaver for example, and decide periodically how much you can spare to transfer into your super.
Explore your insurance
Depending on how much attention you pay to your super statements, you may or may not even be aware if you are paying for insurance inside your super.
This could include life insurance, total and permanent disability cover, and/or income protection.
It’s not mandatory for you to hold any insurance in your super, but many funds will automatically include a basic level of cover in their default offering – for which they will be deducting a premium from your account.
If you feel this doesn’t suit your needs, you will need to proactively opt out or scale it back. Or, conversely, you may wish to dial up your cover inside your fund and reduce the amount you are paying for insurance outside of super.
Either way, take care to thoroughly read your insurance product disclosure statements before making any decisions and ask a professional if you feel you need advice.
MoneySmart outlines what to weigh up with each approach.
Know how your super's performing
Are you comfortable taking bigger risks with your money for potentially bigger returns? Or do you like to play it safe?
These are the types of questions you need to consider if you’re thinking about changing your superannuation investment mix.
If you have some investing knowledge, perhaps hold a range of assets outside of your superannuation or want to invest particularly aggressively to try to boost your retirement savings (subsequently taking on more risk), you may want to take a second look at your super.
But, if you’re not so comfortable in the world of investing, that’s ok too. Most people are in their fund’s default MySuper account, which means their money is invested in a balanced option that aims to deliver growth while also keeping some money ‘protected’ in less risky assets.
The idea is that the default is a good option for the majority of Australians and new requirements around the MySuper dashboards aim to make it easier for people to understand how their super is invested and the returns it is generating.
So, it’s not so much that you should feel like you need to change your investment mix, but more that it's worth paying attention to your statements and reviewing your fund’s MySuper dashboard so you can keep on top of how your superannuation is performing.
Nominate a beneficiary
Not usually the most popular part of the paperwork, letting your super fund know who should receive your super and any potential insurance payouts in the event of your death is nevertheless an important piece of ‘life admin’. Particularly if you have a family and/or any other dependants.
MoneySmart is a good place to start for some basic info around how this works.