We all get a superannuation account when we start working but have you ever really paid attention to it and do you know why it’s so important?

Superannuation (or super) is a compulsory savings account for your retirement. The goal of a super account is to accumulate money so that you have money to live off once you stop working. Understanding your super is a key aspect of financial health and staying on top of any changes in super should be a priority for everyone. 

In response to the financial challenges posed by an ageing population, the Keating Government introduced the Superannuation Guarantee (SG). The SG is a compulsory amount that your employer must pay into your super. It’s currently set at 9.5% of your salary but is set to increase gradually starting from 2021. By 2026, the rate should be 12%.

Why is super important?

The government funded pension has been put under increasing pressure as the population ages therefore, most Australians will rely on their super to live once they stop working.

The Association of Super Funds Australia (ASFA) has done a calculation of how much you’ll need in your super fund to retire. A modest lifestyle assumes only basic activities. A comfortable lifestyle assumes a range of leisure activities and both domestic and international holidays.

Most importantly, both models assume home ownership.

Modest Lifestyle Comfortable Lifestyle
Single Couple Single Couple
$27,425 $39,442 $42,953 $60,604

*individual households and budgets may vary (based on ASFA June 2018)

Consolidating super

Did you know approximately 40% of Australians have more than one super account? This equals 6.3 million accounts or just under $18 billion in lost super.

It’s important to make sure you consolidate your super so that you can save on fees and have the largest possible pool of funds to invest. It also reduces admin and makes it easier to manage an investment strategy once you’re ready to get serious about your super.

Most funds have an online tool that lets you search for lost super funds and consolidate them. Alternatively, you can use the MyGov portal.

Tips for consolidating super

There are a few things to think about before you consolidate your super:

1. Exit and withdrawal fees

Are there any exit or withdrawal fees to think about? This might influence your super fund choice.

2. Benefits and features

Are there any benefits or features from your super fund that are important to you? You might want to consider this when chose a single super fund. 

3. Insurance

Do you have insurances associated with your existing super fund? Insurance coverage is cancelled when you close a fund, so make sure you understand what you might be giving up.

Here’s a tip:  If you have any existing medical conditions or are unsure about whether you need insurance,  you should consider consulting a qualified financial advisor.

4. Update your details

Update your employer so future super payments are directed to the right account. If you’re using Employment Hero, it’s easy to go into your profile and update your super details. If you’re employer is using another method, make sure you alert your HR champion.

How to help your super grow

There are a number of ways that you can help your super grow while you’re working. 

1. Reduce fees and insurance

Reducing your fees and insurance. Consolidating your super can actually make a huge difference by reducing your fees and premiums. Also look at the insurance that you have inside your super fund and ensure that it’s the right level of cover for you.

2. Make voluntary contributions

Make voluntary contributions. While your employer has to contribute to your super, you can chose to make additional contributions from your salary. Salary sacrificing into super has tax advantages. Visit the ATO for more details or talk to a financial advisor. 

3. Government co-contributions

Depending on your salary, you might be eligible for co-contributions from the government on any voluntary contributions that you make to your super. These do vary depending on your circumstances so it’s best to check the ATO website or speak to a financial advisor for more details. 

4. Manage your investments

Actively managing your investment mix. Super is an investment and most super funds will give you some options for how you can invest your money in shares, bonds or cash. Actively managing these can help your investment grow but be mindful, as with all investments, there is a risk. It’s always best to stay within your risk tolerance and if you’re unsure get some financial advice.

Connect with one of our financial experts to learn how you can get the most out of your money 

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