Savings tips: how to give your superannuation a check-up

Superannuation has undergone sweeping changes lately and now is an ideal time for a quick examination. Here’s what to do.

Superannuation statements will arrive in inboxes and mailboxes soon and tax refunds are on the way too, making now a great time for a super check-up.

New rules lifting compulsory employer contributions – the Superannuation Guarantee – to 10 per cent started in July in a welcome boost for savers.

People can check all their super details online or by phoning their fund, or checking their annual statements that typically arrives between August and October.

Money coach Karen Eley says annual super statements will help savers make projections about their future wealth.

“It’s an opportunity to think about making extra contributions – do you have any surplus income? Should you consider doing it at your stage in life?” she says.

“The effect of compound interest over 20 years is phenomenal.”

FREE CALCULATORS

Free superannuation and retirement calculators on moneysmart.gov.au let you plug in your age, income, super balance and investment to forecast your nest egg at 60 and beyond.

Another important step, Eley says, is to work out if you’ll have enough money, which starts with examining your current spending.

“If you do a budget to work out your current lifestyle costs, you can review it,” she says.

Financial coach Karen Eley says we are creatures of habit when it comes to spending money.

Apart from mortgages and children’s costs, which should disappear by retirement, most other expenses are likely to be similar to today, Eley says.

“We are creatures of habit – we tend not to change too much,” she says.

Many people have life insurance cover through their super, which can be a cost-effective way to protect their family financially because the premiums aren’t paid from their household income.

“We should all have some life insurance, but the level of life cover you need changes depending on what stage of life you are at,” Eley says. No more mortgage or school fees to pay for? If so, consider reducing life cover.

ATO ONLINE HELP

QSuper’s chief of member experience, Jason Murray, says people can also check their super using ATO online services through their myGov account while doing their tax return.

“After you have accessed and reviewed your income statement, click the super tab on the ATO online home page to view your super fund details and employer contributions for the year,” he says.

“You’ll be able to see all of your super, including any old super fund accounts you may have forgotten about as well as any money the ATO is holding for you.”

Almost $14 billion in lost and unclaimed super is sitting in more than 2.2 million accounts.

Murray says people should look examine their investment mix and look at ways to save on tax while contributing extra to super.

“The annual caps on before and after-tax contributions increased from July 1 and will give savers the option of adding even more to their super this year.”

CAN YOU DO MORE?

People can now contribute up to $27,500 a year and claim a tax deduction for it, although this cap also includes employer contributions.

One-off super contributions are an option, although many people may find it easier to set up salary sacrifice with their employer to spread their deposits across the full financial year.

BT Superannuation managing director Melinda Howes says people should consider putting in a little more than what their employer pays.

“Check that your employer is putting in the extra 0.5 per cent now the superannuation guarantee has gone up to 10 per cent as at 1 July,” she says.

“COVID-19 has brought Australians’ super savings front of mind and now is a great time to look at your fund and see how it performed to 30 June. It’s also important to look at the long term performance.”

BT Superannuation’s Melinda Howes says contributing extra helps. Picture: Hollie Adams

FIVE QUICK CHECKS

• Do you have multiple superannuation funds costing your extra in fees, or lost or forgotten accounts? Using ATO online services through myGov can help you find and consolidate them.

• Life insurance in super is vital for most people, but make sure your cover is right for your current circumstances.

• Is your investment mix too risky or conservative? Younger people in their 20s and 30s can usually afford to dial up the risk because they have decades before retirement.

• If you made extra contributions to super in 2020-21 and want to claim a tax deduction, you will have to lodge a notice of intent to claim form with your super fund before finalising your tax return.

• Can you add extra cash into super? Small deposits throughout a working life can make a huge difference at retirement thanks to the power of compound interest.

Source: QSuper