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Superannuation – the questions you should ask

Superannuation should be a major part of every person’s working life. It’s one of the main ways in which you’re going to fund your retirement. That’s why it’s important to ensure you get the best possible outcome from your fund to provide you’re comfortable and able to fund your lifestyle in retirement.

Employers in Australia are required to put nine per cent of an employee’s income into a superannuation fund annually. This is called the Superannuation Guarantee Contribution (SGC). A change flagged by the Rudd Government in the 2010 Budget promised to gradually raise the SGC to 12 per cent by 2020.

According to Switzer Financial Services, in order to live comfortably in retirement, you need to put aside 15 per cent of your income for 40 years.

It’s obvious, but the earlier you start saving through superannuation, the higher your fund balance in retirement is likely to be.

Different funds

Many people have questions about the difference between industry funds and superannuation funds owned by financial institutions. The latter are often called retail master trusts. Industry super funds generally charge lower fees to their members and don’t pay commissions to financial planners, whereas fees for a retail master trust may be higher and usually pay commissions to financial planners for recommending the product. It is important to be aware of conflicts of interest in this situation. Some financial planners may recommend a particular product because the commission for selling the product may be higher than other products and not because it’s the most suitable product for you.

Peter Switzer, founder of Switzer Financial Services, a true fee-for-service financial planning firm, says many planners don’t recommend industry funds because they don’t pay commissions. However, Switzer explains, industry funds are not geared to help advisers. There are time delays, he says, and even neglect from the back offices because industry funds under-resource their area of administration that interfaces with financial advisers.

If you speak with an adviser, find out how they are remunerated so that you can understand the conflicts of interest that may bias their recommendations. Also, ensure you read through the super fund’s product disclosure statement.

Retirement and super questions.

Switzer Financial Services says to ask the following questions when thinking about retirement planning and super:

  • Where should my money be invested?
  • How much in super will I need to build up?
  • What other investments do I need to make?
  • Is my retirement planning strategy tax smart?
  • What is the financial game plan before and after retirement?
  • How do I get the social security entitlements while minimising tax?
  • How do I protect myself from running out of money in retirement?

So do your homework and see a truly independent adviser. Then you will maximise your chances of having a healthy balance in superannuation.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.



Published on: Tuesday, June 15, 2010

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