Senator Nick Sherry, Minister for Superannuation and Corporate Law, has urged Australians to make a new year's resolution to tidy up their superannuation.
"The past year has been a difficult one for super fund members due to effect of the global financial crisis, however, members should be aware that superannuation is a long-term investment and markets will recover.
"Members can take important steps to maximise their superannuation benefit long-term."
"Take an interest and be an active superannuation fund member. It's your retirement that is the end goal,' Minister Sherry said.
Ways to maximise your super include:
Consolidate your super accounts
Ask yourself whether your current superannuation fund has your address and contact details. Ask yourself whether you have ever contributed to other funds that you have since lost touch with, for example, not received a recent statement from.
Having more than one super fund account means you get charged multiple fees and there is a risk that any small super balances can be eaten up by fees. There are 6.4 million "lost" super accounts totalling $13 billion.
Consider using the Australian Tax Office's SuperSeeker tool to find out if you have any lost super. You can access SuperSeeker online using the SuperSeeker tool: https://superseeker.super.ato.gov.au/individuals/default.aspx?pid=0 or by phone 13 28 65 and following the prompts.
Provide your fund with your Tax File Number
If your super fund has not got your TFN there is a risk that all employer contributions, including salary sacrifice, will be levied tax at the highest marginal rate of 46.5 per cent.
Check fees and assess whether your fund is competitive
Treasury estimates that the average ongoing fee across the superannuation system is currently 1.25 per cent though the range can be less than 1 per cent through to 2 per cent or more. Fees can make a significant difference to your end superannuation benefit.
Check returns over 5-7 years and see how your fund compares with peer funds
One-year returns in superannuation are not a valid measure of your fund's performance because super is a long-term investment. Consider your fund's performance over a 5 year, 7 year even 10 year period as these timeframes provide a more accurate measure of your fund's performance over a market cycle, including rising, falling and flat markets.
Remember to compare like-with-like. For example, don't compare the cash option with the shares option as the risk/return profile is totally different.
Most people in superannuation who have not actively chosen an investment option are in their fund's ‘Balanced' Option which is a mix of assets including domestic and international shares, fixed interest, property and cash. So, if you are making comparisons, compare the performance of your balanced option with other funds' balanced options.
Check your level of life insurance and assess whether it is adequate
Most employer-sponsored superannuation funds, such as industry super funds or corporate master trusts, carry a level of automatic life insurance often linked to the member's age. For many people with debts and/or a family this level may be inadequate. Check your level of automatic coverage, assess whether it is enough for your needs and consider buying additional units of cover through your fund. This will usually be cheaper than buying stand-alone cover outside super.
Are you making the right level of contributions?
Financial product regulator ASIC and various superannuation funds/providers carry superannuation calculators on their websites to help people work out whether their current level of super contributions are enough to help them achieve the lump sum or annual income they desire in retirement. As with mortgage calculators, the good ones will let the user enter their own information/data and try different scenarios, such as more or less contributions or greater or lesser investment returns. These are not foolproof but provide a good starting point to focus the mind on what is needed to achieve a certain retirement goal.