Superannuation: why protecting your huge asset falls on you

Your superannuation savings can be attacked from many angles, so it pays to protect this large lifelong asset. Here’s what to watch.

Your superannuation is a huge asset that should be protected. Picture: Matt Turner

It’s likely to be the second-biggest asset you will ever own, after the family home, and for the millions of Aussies who aren’t homeowners it probably will sit on top of their wealth tree.

Superannuation balances are ballooning across Australia thanks to strong financial markets, rising compulsory employer contributions and generous tax incentives, but many of put it in the too-hard basket.

It sounds crazy that most people would worry more about dropping $100 in the street rather than losing $10,000 or in our super, but it happens often.

Super is just as much your money as that missing $100 note – the only catch is you cannot touch it until after age 60, a measure designed to stop the most common human behaviour: blowing money on stuff we don’t really need.

There are plenty of reasons why you should guard your nest egg.

This leads to the question of protecting our super from scammers, bad management and poor performance.

If you’re not keeping an eye on your super, who is?

While your super is protected from your own frivolous spending (apart from Coalition early-access schemes in pandemics), it’s not protected from bad investments and bad actors.

Good financial planners will keep an eye on it for you, but their dwindling numbers and high prices put them out of reach for many people.

Government moves to allow super funds to provide more advice offerings are progressing slowly – and may not be legislated before next year’s election.

Financial lobby groups warn of decades of future pain if advice reforms aren’t implemented.

The rules are super-complex. Even people who think they know what they’re doing – like me – can get burnt. I personally missed out on a $4000 tax refund this year because of an obscure rule that cost me a planned superannuation tax deduction.

I hear horror stories of people who are conned into putting money into a self-managed super fund or other super investment option that they think is legit, only to watch their life savings melt away into the hands of crooks.

Unless you can afford to pay thousands to a financial planner, the only person who can truly guard your superannuation is yourself. Here are four areas to watch.

SCAMS

More people are getting stung by superannuation scammers, who pretend to be from legitimate financial firms and may steal your identity, set up a super fund in your name then transfer your money to that. Others lure people with promises of accessing their superannuation early, prompting them to set up a self-managed fund that then gets ripped off.

Scamming is a fast-growing industry, so always be on guard. Financial regulator ASIC says it is targeting misconduct in the superannuation space, and says people should update their account security, know the rules, check details and speak with their fund directly.

POOR PERFORMANCE

This can come from excessive fees, bad investment returns, or both. Experts say paying just 1 per cent extra in fees each year can cost you hundreds of thousands of dollars by retirement.

WRONG ASSET MIX

Many young people don’t invest their super aggressively enough when they still have decades to benefit from high-growth assets. Similarly, some older people leave their super sitting in a default fund option, which may be too risky for their life stage.

LIFE INSURANCE

Millions of people hold life insurance in super, and while underinsurance is a big issue, over-insurance can be costly too. If you’ve got no debt and no kids to put through school, do you really need a mountain of life insurance cover?

Originally published as Superannuation: why protecting your huge asset falls on you