Finance Dollars & Sense Super tune-up: Four things to check when reviewing your superannuation

Super tune-up: Four things to check when reviewing your superannuation

superannuation happy older couple getty
Reviewing your superannuation for 30 minutes every year could save you hundreds of thousands of dollars at retirement. Photo: Getty
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Want to do something relatively quick that could make ‘future you’ tens of thousands of dollars richer?

No, you’re not about to read about some ninja investment strategy. It’s much simpler than that: Review your super.

Super is something many of us tend to set and forget, but it pays to give your nest egg an annual tune-up to ensure your investments are still working for your current situation.

Reviewing your superannuation

Centaur Financial Services managing director Hugh Robertson said people should read their super statements and go on to the government’s Moneysmart website to learn how superannuation works.

Half an hour of reading and maybe a few phone calls now could see you potentially hundreds of thousands of dollars better off when you retire, he said.

“You might be costing yourself $250,000 by just not looking at something that is going to take you 30 minutes to look at once a year,” he said.

“If I’m going to give you $250,000 at retirement but I need your time for 30 minutes once a year, I reckon that’s a deal people should take and look at their super and make some informed decisions.”

So what should you review during your super tune-up?

Your superannuation asset allocation

It’s important to understand your investment options and the breakdown between growth and defensive assets known as your asset allocation.

Growth assets include domestic and international shares and property securities, while defensive assets include cash and fixed interest bonds.

Over time, defensive assets are generally less risky but deliver lower returns, whereas the opposite is true for growth assets.

Unless you direct them otherwise, your employer will pay your super into a default option, known as a MySuper account.

Steps Financial principal Antoinette Mullins said a default fund like a MySuper balanced account typically has 70 per cent in growth assets and 30 per cent in defensive, whereas the split for a more aggressive growth option might be 85 per cent growth and 15 per cent defensive.

Conservative investment options might be evenly split between growth and defensive assets.

“Just like you would buy a car, you would look under the hood and really understand what’s going on with the engine, you would do the same with an investment,” Ms Mullins said.

Your ethical investments

You might also want to ensure your superannuation isn’t funding activities like coal mining, tobacco or human rights abuses.

“As you look at your fund, see if there is an ethical or a sustainable investment option for you,” Mr Robertson said.

You can start by reading your fund’s environmental, social and governance policy on their website and check if they are listed on the Responsible Returns website, which lists products certified by the Responsible Investment Association of Australasia.

Your returns

Over the long term, a balanced MySuper account will tend to return about 6 to 7 per cent a year while a high-growth account will return about 8 per cent, Ms Mullins said.

Unless you are close to retiring, you need to remind yourself that super is a long-term investment so you don’t get spooked by volatility during a crisis like a global pandemic.

The median growth fund soared about 18 per cent over the year to June 30, 2021, according to Chant West.

But if you rewind to March and April 2020, growth funds plummeted in value as the pandemic shook global financial markets – and so if you moved money into cash or completely withdrew it from super back then, you would have missed out the fastest sharemarket rally in a generation.

Mr Robertson said you can get a good idea about a fund’s performance by looking at returns over the past decade.

Your fees

Superannuation funds can be under active management, where managers are making decisions about what to buy and sell based on their knowledge, or passive management, which is designed to mirror a specific index.

Mr Robertson said actively managed funds usually have more expensive fees but the returns can also be higher.

“It’s not just about cost … you want to know what you’re paying, but don’t go for cheap (fees) for cheap’s sake; find the best managers first,” Mr Robertson said.

The best option is to a choose fund that generated high net returns – that is, funds minus fees – over a long period of time.

For more information on superannuation, you can visit Moneysmart or the Association of Superannuation Funds of Australia (ASFA)’s website Super Guru.

Mr Robertson said if you want to change your investment option within the same fund, most super companies allow you a certain number of switches each year.

The New Daily is owned by Industry Super Holdings