They say change is as good as a holiday, and us Aussies are certainly taking that advice to heart. We’re leaving and entering new jobs at an unprecedented pace and the average renter moves house every 22 months. All this change allows for exciting and dynamic lives, but there’s one thing that can suffer – the hip pocket.
With an estimated 17 different employers in a lifetime, and just as many rental addresses, our superannuation can all too easily get lost or forgotten. And the impact of such loss might surprise you.
The Productivity Commission reported in January 2019 that holding multiple super accounts means the average full-time worker at retirement can be short-changed by 6 per cent or $51,000 or the equivalent of one year’s after-tax income.
So, rolling all your stray super accounts into one fund is a no-brainer, but how do you actually do it?
First, understand the benefits of consolidating
If your super is being held in more than one account, you’ll be paying unnecessary duplicate fees and potentially even extra insurance premiums. You’ll also likely have a mountain of paperwork to deal with, or in the worst-case scenario you might have lost track of your hard-earned cash altogether.
In response to this costly problem, the Australian Government is taking action.
By the end of October this year, low-balance inactive accounts holding less than $6000 will be transferred to the ATO. While the ATO will attempt to match funds to active accounts, those that can’t be matched will receive returns only at the Consumer Price Index (CPI), considerably lower than many industry super funds. It’s a timely reminder to get moving on that long-ignored to-do list item.
Once you get started, you’ll be amazed how simple it is. Industry Super Australia chief executive Bernie Dean explains.
In the ‘there’s-an-app-for-that’ era, consolidating has never been easier. Many super funds simplify the process by offering a ‘click to consolidate’ tool on their website or mobile app.
Another option is to log on or set up a MyGov account. Link your MyGov account to the ATO using your tax file number and click on the Super tab. You should see all your super accounts listed there. Consolidating is as simple as clicking transfer on the ones you want to roll-over.
Choosing a fund
Choosing which fund to transfer into might feel overwhelming, but don’t worry, it’s not rocket science. It’s important not to just transfer into the fund with the largest balance. Consider each fund on its merits: What fees does it charge? What insurance or other benefits can you access? Will you incur exit fees?
Importantly, you want to know how each fund performs. Remember that the top performing super funds year on year are industry super fund’s growth options. Over the three years to 2018, these funds returned 8.5 per cent per annum, compared to retail’s return of 6.9 per cent.
Last but not least, don’t forget to tell your current and future employers what your preferred fund is to avoid having to repeat the process in the future.
Industry SuperFunds have an easy to understand guide on how to consolidate here. With 15 Industry SuperFunds to choose from, there is one for every type of worker. Industry SuperFunds are run only to benefit members, have low fees and have never paid commissions to financial planners.