Generally speaking, if you’re 18 years old or over, and you earn $450 or more in a month (pre-tax), then your employer is obligated to pay 9.5% of your salary into your superannuation fund – how good is that! And better yet – pending any legislation changes – this amount is likely to increase incrementally to 12% by 2025.
But managing your super, let alone choosing a super fund can be overwhelming. Which fund has the best returns? How much should I be paying in fees? Superannuation can be confusing.
But never fear, we’re here to break it down. In this email we’ll dive into the following questions:
Your superannuation is a retirement nest egg. You contribute a small portion of your income so that by the time you retire there is a sizeable investment to spend on whatever you want, from your grandkids’ education to sailing around the Bahamas.
But it ain’t that simple. Working in the superannuation industry for multiple years, I quickly realised that many super funds are not up to scratch, either due to huge fees or poor investment expertise. It’s no wonder performance between super funds varies so much!
And even then, the right super fund (and investment option) can differ between people. Choosing the right super fund for you and understanding the risk involved is key to a successful pot of gold at the end of the working rainbow. Yet despite its importance, it’s amazing how little we actually look at our super. What am I invested in? Is it too risky? Is it not risky enough? Am I getting the best bang-for-buck?
Below we highlight our top tips to ensure your super fund is working as hard as you (or maybe even harder!).
With around 200 superannuation funds in Australia (although this number is falling as the industry consolidates), it can be a daunting task to select one that’s most right for you. As a result, many people default to the superannuation fund selected by their employer. While this can be a reasonable option, it’s important to know what’s out there to make the best decision possible.
There are many factors which go into our list of recommended super funds. We’ve broken down our top picks into these recurring categories:
Our top picks in the “Price is Right” category focus primarily on strong expected returns and low fees.
If you’re looking for a more ethical approach to your super, our top picks in the “More than Money” category incorporate sustainable investing options.
Incorporating sustainability into a super fund’s major investment options is increasingly common, taking into consideration environmental, social and governance factors. Many funds, however, offer a dedicated ethical investment option, combining positive screens (investing in “good” things) and negative screens (excluding “bad” things).
Sustainable investing can vary between super funds, and include things such as excluding tobacco, controversial weapons and investments in fossil fuels and carbon-intensive businesses. These investment options go the extra yard when it comes to sustainable investment.
Most super funds have several investment options based on different levels of risk and return. Generally speaking, you’ve gotta risk it for the biscuit! A high return-seeking option will be riskier, investing in more volatile assets such as equities and opportunistic property, infrastructure and private equity. A low return-seeking option will be less risky, investing a greater proportion of your portfolio into more predictable things such as bonds and less risky property.
Everyone’s risk tolerance is different and can depend on your financial situation outside of super. If you’ve just started working we would typically recommend a higher return-seeking option. This is because you have a longer investment time frame, and even if there are some periods of poor performance, overall you should expect a higher return in the long run.
The most common issue with people’s super is having multiple accounts with different super funds. Why is this a problem? More accounts equals more fees. This is fun for the super funds, but not you.
Millions of Australians fall victim to this, which collectively costs billions in additional fees each year. Luckily, MyGov allows everyone to see which super funds are attached to their name, and easily consolidate funds into a single account (see this ATO webpage for more details).
So, if you’re not sure where the super is from your first job in retail / fast food / telemarketing, check it out and make sure you’re not paying unnecessary fees!
And there we have it – some top tips to make sure your superannuation is hard at work!
Before we sign off, one final tip: try to stay up to date with your super! Most super funds will send regular communications, and many of our top picks have great websites and mobile apps to help you understand what you’re investing in, and how it’s performing. We recommend setting yourself a reminder every three months to log into your account and see how it’s going. It’s likely to help with your other investments too!
Stay tuned for upcoming topics or check out or other useful articles here. We’ve got plenty more gold to help you make the leap from top student to top professional!
Got feedback? We’d love to hear from you! Shoot us an email at [email protected]
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