Next week we will see the introduction of another raft of significant changes to superannuation.
The changes largely relate to how much people can contribute to their super over their working life and the concessions they receive for contributions.
These are significant issues for many people currently in the workforce or approaching retirement, so it is vital you check how the changes might affect your super and your capacity to save for retirement.
However, while the changes are substantial and the big-picture questions seem daunting, the factors that make a significant difference over time to retirement savings remain the same.
And those factors are simple. You can take simple steps to save more money and make a difference to your retirement savings.
Importantly, they will allow you to take control of your super regardless of any changes made in Canberra.
For many Australians, the government’s Age Pension will continue to be the base of retirement.
But there is no doubt that while most Australians will continue to be eligible for the pension, most would prefer not to rely solely on it in retirement.
There are five key steps to help avoid this reliance; steps that could possibly means hundreds of thousands of dollars more in retirement.
Choosing a low-cost, high-performing super fund that delivers better long-term investment earnings.
Consolidating super into one account.
Contributing more when possible.
Checking insurance to ensure the right coverage.
Continuing membership when changing jobs and going into retirement.
The difference these steps can make to your super balance is important. With current life expectancies, and depending on retirement age, retirement income may need to last 20 years or longer.
How much super is required to meet daily expenses, as well as any unexpected costs? This will depend on any existing debts.
After determining the above questions, is the Age Pension still an option?
Once eligibility is worked out it is important to not rely on the Age Pension as a sole income as government policies can change. Instead, the aim should be to use super to top up any Age Pension.
To make the most of additional money put into super, it’s best to consider the type of contribution – before or after tax – and not just the amount you contribute.
Another step you can take is to consider a Transition to Retirement (TTR) scheme. This can be a great way to grow your super savings while you’re still working. Using a TTR scheme, you can keep working full-time and boost your super or reduce your work hours and soften the drop in income. Talk to a financial adviser to see if this option is for you.
When you’ve reached the age when you can use your super and have either permanently retired or changed jobs after turning 60, you can access your super as a regular income, a one-off lump sum, or a combination of both.
Combining super accounts remains a key issue in Australia. The simple fact is that if you have multiple super accounts you are paying multiple fees. Because some level of insurance is also part of your super, you are potentially paying for additional insurance that you don’t need.
Added to this is the even worse situation of $12 billion in lost super in Australia, a totally unacceptable situation. A quick check on the ATO’s website can tell you if there is lost super out there with your name on it.
Finally, we all need to talk about super. Encourage your family – parents, children and even grandchildren to take an interest in their financial future by following the five Cs.
Paul Schroder is a Group Executive at AustralianSuper, the nation’s largest superannuation fund. He has 20 years’ experience in the financial services sector.
* The New Daily is owned by a group of industry super funds