What you should do with your super as volatility strikes

Superannuation sparkled last month but the outlook for financial markets remains clouded, and a range of other risks are emerging from the royal commission and federal election.

Super funds bounced back in January from their late 2018 beating, but members should brace for a retirement savings rollercoaster this year.

Volatile global financial markets will combine with election uncertainty and potential rule changes flowing from the banking royal commission’s final report, to be released on Monday.

Superannuation specialists say fund members need to keep an eye on what’s happening, but not rush into snap decisions ahead of any rule changes.

After four consecutive months of falls, super fund returns rose in January as share markets in Australia and the US climbed 4-5 per cent, but Catapult Wealth director Tony Catt said the outlook was unclear.

MORE: Kochie’s five key money lessons

MORE: Meet 2019’s tax changes head-on

“There’s an underlying current that the economy is very blurry at the moment,” he said.

Labor’s plans to ban franking credit refunds from shares and reduce negative gearing and capital gains tax benefits have been a hot topic, but the uncertain make-up of a future federal parliament could halt their progress.

Catapult Wealth’s Tony Catt says the outlook for super this year is blurred.

Mr Catt said super fund members should avoid knee-jerk reactions. “A lot of these laws that have been bandied around could potentially change,” he said.

“I’m getting a lot of feedback around franking credits and negative gearing laws, but my basic response to clients is don’t jump at shadows. Stick to your strategy because a lot of water has to go under the bridge with this.”

MBA Financial Strategists director Darren James said the biggest risk for super was legislative risk, not financial markets.

“There will always be changes because it’s a very big pool of money. It’s still the best savings vehicle for retirement, bar none,” he said.

“Make sure you take advantage of the tax concessions available to you.”

MBA Financial Strategists director Darren James says super’s tax incentives are generous.

There has been talk of winding back some super tax incentives so people should make the most of them while they can.

Mr James said incentives such as salary sacrifice, government co-contributions and spouse contributions could be worth a 15-50 per cent return on your money. “That’s a much bigger bang for your buck than what the markets are doing day-to-day,” he said.

Industry Super Australia chief executive Bernie Dean said people could take a few simple steps this year to help set up their nest egg.

This included “consolidating multiple accounts, claiming lost superannuation and choosing a fund that has outperformed over the long term”, he said.

“They should also check they’re being paid the correct amount.” The latest available figures showed almost three million workers were short-changed with their super, Mr Dean said.

SuperRatings executive director Kirby Rappell said volatility was likely to be a feature of financial markets in the coming months. “However, it’s important to keep a long-term perspective and recognise that super returns have been overwhelmingly positive over the last decade,” he said.

@keanemoney