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If superannuation wasn’t so important I would probably ignore this press release on what the Gillard Government is doing to our superannuation. After all, it had nearly become a national convention to treat superannuation as being as interesting as a documentary on the sex life of mosquitoes but the GFC has changed that.

The ability of a stock market crash to engender interest in “what has happened to my super?” questions is the only positive outcome from this economic and financial mess, which started nearly four years ago in October 2007.

Super interest in super

I know the interest in super has escalated as I have been a part of an experiment by Sydney radio station 2GB, which took the gamble to encourage me to do The Super Show, on between 9 and 10 pm, Monday to Thursday, and we are getting heaps of calls from people who want to understand super.

When I start the show I make the point that for many Aussies, their super balance will become more important than the value of their houses. In Europe, many people rent their whole life and the main game is to build up their equivalent pension funds.

Young and old

Here, the younger Australian will get around 40 years or more of working and collecting a minimum of nine per cent super from their bosses, which grows to 12 per cent in coming years, and this has the capacity to be a really serious balance. I’m talking figures with six zeroes on them and so it’s high time that all Aussies – both those close to retirement and those a long way from it – got involved in their super.

I know it’s happening as I’m getting calls on this super question and answer radio program from people as young as the low 20s, but there are plenty of callers in their 30s and 40s looking to set up their own self-managed super funds.

Super research

So why should the young be interested in their super? Well, as the industry fund ads show, if you take two workers in the same job and on the same pay working for the same time, the difference in what super each person gets can vary by $60,000 to over a $100,000.

These ads focus on the fees aspect of different super funds but there is also the performance issue and all super players should know the name of their fund, the costs/fees or MER of the fund, the long-term performance of the fund and finally what rival funds’ fees and relative performance are.

If you don’t know how to do that, then check out websites such as www.superratings.com.au or www.chantwest.com.au where this work is actually done for you.

The reforms

Against this background, the Minister for Financial Services and Superannuation Bill Shorten announced changes to how super will operate. Called the Stronger Super reforms, Shorten argues that a 30-year old on average full-time wages should be better off by $40,000 more in retirement because of these changes. This, of course, is an average case example but given what I have heard on the radio show, there are a lot of people in the wrong funds paying high fees for too long a time and so this figure is believable.

The changes include the introduction of MySuper, which is a simple, low cost default superannuation product that starts on 1 July 2013. There will be about 70 funds that will follow the Government’s guidelines of fees and on a single, diversified investment strategy.

These are not meant to be ‘shoot the lights out’ funds, but the plan is to make sure if an employee doesn’t select their own fund by telling their boss where they want their money to go, it won’t end up in an expensive fund that will reduce the employees’ nest eggs when they eventually retire.

Lost and found

The Government is also going to improve the process to help Aussies who have lost track of their super balances, maybe because they have had multiple jobs in different industries and have never really thought about their super. Small balances being hit by fees can play havoc with a person’s super balance and so anything to help consolidate funds into one fund is a good idea.

Right now the Australian Tax Office has a product on its www.ato.gov.au website called SuperSeeker, which helps us find lost super and so anything to bolster this already good service is a step to be applauded.

Changes for employers

Minister Shorten is also moving to make employers show that they are making their super obligation payments by having the details of the payments shown on payslips. The Government is showing sensitivity to the impact of this demand on the workload of small business bosses, and this is an issue dear to my heart as a well-known small business advocate. However, something has to be done about those cowboy employers out there who have been robbing employees of their super by simply not making the payments and then going bankrupt!

Finally, the Government is promising to give more muscle to APRA, ASIC and the ATO to improve the oversight of super, which I think is a good thing considering the fact that this is the most important asset many of us will ever have.

Keep a close eye on super

Of course, while all of this is crucial, something even more critical is for Australians to watch their super like a hawk, just as you do your bank balance, because over time it will prove to be more valuable than a bank balance because we can’t get our grubby fingers on it until we retire.

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: Monday, September 26, 2011

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer, Roger Montgomery, Paul Rickard and Charlie Aitken the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

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