Question: I know nothing about money matters and when I sold my parents’ home and bought a new home, and had some cash, I was advised to put it in super, which I did, then I panicked when COVID hit and it was draining out whilst I watched, so I changed it over to All Cash. Now I’m told I should put it back into shares! Help!

Answer: Firstly, it’s important to understand that superannuation is just a structure to hold investments. Within super, you still need to select an appropriate investment, or multiple investment options.

Unfortunately, many people have made very similar mistakes to yours – selling down growth assets, like shares, at or near the bottom of the market due to fear they will ‘lose their money’.

Many studies and data have shown that when sharemarkets make significant gains more people start investing, and when markets have fallen, people start to take their funds out.

This is the opposite of what we are told to do: Buy low and sell high.

Warren Buffett is famous for being a contrarian investor, and he buys when others are selling and sells when others are buying.

Of course, it’s nearly impossible to time the market and it’s even tricker when emotions like fear and greed take over.

The best investment approach for most people is to select their investments based on their tolerance for risk, goals, and investment timeframes.

Most super funds provide educational material on investments as well as personal advice that helps members determine which investment option is most appropriate for them, based on a series of questions that help determine a member’s ‘risk profile’.

Most superannuation funds can also offer advice on investment choice at no additional cost, as it is covered in your administration fees.

You should get in touch with your fund to see if they can assist.

Once you have switched into a suitable investment then it is important to stay the course, regardless of short-term market movements.

However, if your personal situation changes, then it would also be worth reviewing your investment strategy.

What’s done in the past is done. Try not to dwell on it. But hopefully you can learn from it.

Question: How can I work out the pros and cons of having both a TTR account and a super account and all that goes with that?

Answer: A ‘TTR’ account is a transition-to-retirement pension that can be commenced from some or all of your super once you have reached your preservation age.

It can pay you a regular income stream and is ideal for those needing additional funds, either to repay debt, supplement existing income, or to make additional super contributions.

The accounts are also commonly used when someone moves from full-time to part-time work and needs an income top up.

Whether you should keep open your regular super account depends on your circumstances and future intentions.

If you plan to make future contributions into super, then you will still need a regular accumulation super account.

For example, regular employer SG contributions and salary sacrifice contributions can only go to a super account and cannot be made into a TTR or pension account.

Another important consideration is insurance. Does your existing super fund provide you with life, TPD, or income protection insurance that you find valuable?

Bear in mind that if you close your super account, any insurance will be lost, and if you decide later on that you require insurance you may not be able to obtain any cover.

With most industry super funds, you can invest your money in the same way if it is in the accumulation or TTR stage, as most funds offer the same investment options across the different account types.

From a taxation of investment returns perspective, there is no difference in how your earnings (investment returns) are taxed in either account. Under the age of 65, they are taxed at a maximum of 15 per cent.

If any of the above is relevant to yourself, then you may wish to retain your super, even if it is a small amount just to keep it open.

If that is the case, ensure you choose a fund with low fees, so it does not erode your balance.

Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives. 

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