17th Feb 2016

Superannuation – is your deposit guaranteed?

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hands protecting a pile of coins and a spout meant to suggest superannuation savings
Debbie McTaggart

With murmurings of a financial crisis gaining momentum, it may be worthwhile asking your super fund just how safe is your super.

Many people with money invested in superannuation assume there is some kind of deposit guarantee, such as that offered under the Financial Claim Scheme (FCS). However, the means by which superannuation is invested, may mean that your deposit into super is not covered.

Firstly, you need to understand the scope of the FCS. In the instance of an Australian Approved Deposit Institute (ADI) being unable to honour its financial obligations, deposits made by an individual up to the value of $250,000 are covered by the FCS and will be refunded by the government.

Next, you should be aware of how deposits into public (i.e. open for anyone to join) superannuation funds are invested. Money in a public superannuation fund must be invested by a trustee on the investors’ behalf, and herein lies the problem. This means that any contract entered into, in regards to investment, is between the trustee as a single entity and the bank, not the actual customer and the bank.



The FCS is applied per customer (or entity) per account, therefore the guarantee is actually applied to the trustee, which may have billions of dollars of money invested, making the $250,000 guarantee irrelevant when it comes to trying to get your money back.

Although all ADIs are regulated by the Australian Prudential Regulation Authority (APRA), this does not exclude them from running into financial difficulties. In fact, if you take a look at APRA’s list of ADIs, you may be surprised to find the reach is far and wide, and therefore the risk is also spread.

If you’re unsure how your superannuation fund invests your deposit, or whether or not you are covered by the FCS, you should ask your financial advisor for written clarification.

You can find out more about the scheme and who and what is covered at APRA.gov.au 

All information provided in the article above is general in nature and does not form the basis of any financial advice.

Other articles:

Superannuation advocacy group 

Super fund risk versus reward

 

 

 

 





COMMENTS

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Grateful
22nd Feb 2016
10:38am
To use words like "safe" and "guaranteed" in the same sentence as "superannuation" would have to be the biggest joke going.
Contributions are COMPULSORY but the payments are then left to the vagaries of "the market" where the fund managers GAMBLE daily with that money, and world economic conditions.
How many saw the purchasing power of their "superannuation nest egg" literally decimated by the GFC???
Retired people in their 70s who contributed for their retirement saw their savings, the capital, from which they budgeted for their day to day living expenses, erode before their very eyes??
Superannuation is a gamble and to make it COMPULSORY while not providing a FULL guarantee is an absolute blight on the "system".
The payments deducted for superannuation, which we are continually told is to support people in the retirement and to reduce the call on the "public purse" from pensions, should be treated the same way as "the Future Fund", or Commonwealth Public Servants' superannuation.
The government cannot have it both ways, forcing people to "save for their retirement to take the pressure off the government's budget", but provide no absolute certainty to those that contribute to their own retirement that what they have contributed over all of those years will be there when they need it most, in their retirement.
NO government can guarantee that there will not be further GFCs, especially the way those governments are dealing with the current world economies and the way fund managers have to continue to gamble with that money to maintain their "position" on the monthly "performance indicators". The fund managers and the banks LOVE compulsory superannuation!! WHY???? What a joke!!!!
MICK
22nd Feb 2016
1:16pm
Because fund managers invest primarily in equities (shares) and real estate of course a downturn is going to result in big falls in super balances......but you never hear a complaint when things go up like there is no tomorrow.
In the end there are only 2 things guaranteed in life: death and taxes!
GrayComputing
22nd Feb 2016
10:53am
Private superannuation is the greatest scam ever invented by governments of all flavours.
NO care NO responsibility to have money in the government coffers for a pension as a "reward" life time and taxing the working Australian
With our super trillions the rich and their companies get rich while the periodic deliberated created global finical crisis syphon the money from our accounts into those of the super rich (legally). What a evil mess I lost half my super before retiring and no-one goes to jail for it.
MICK
22nd Feb 2016
1:18pm
Your observations pretty well describe the casino we all live in. In your case it is a pity you had to cash in the chips at the lowest point.
Bonny
22nd Feb 2016
11:19am
If I didn't have my own Self Managed Super Fund I would have withdrawn my money out of the super system upon reaching a condition of release.

Remember no one looks after your money like you do.
MICK
22nd Feb 2016
1:19pm
Tell that to people who win big lottery payouts.
Jannie
22nd Feb 2016
12:11pm
I STILL HAVE A SUPER FUND WITH REST AS I AM WORKING AS A CASUAL, THE AMOUNT I HAD AT THE BEGINNING OF THE FINANCIAL YEAR HAS DWINDLED AWAY BY THOUSANDS SO WHAT I AM CONTRIBUTING IS BEING LOST, WISH I HAD OF PULLED OUT LAST YEAR. THE ANNOYING THING IS I AM STILL PAYING TAX, HOW UNFAIR IS THAT???? AND OF COURSE CENTRELINK DOES NOT LOOK AT LOSSES WE HAVE IN OUR SUPER OR ANY LIABILITY WE MAY HAVE ON OUR MORTGAGES, THEY GET AT US IN ALL WAYS, CROOKS.
MICK
22nd Feb 2016
1:13pm
Seriously Debbie do people really expect a 'guarantee' for everything in life???
If you want to worry about your super worry more about the government getting its hands on it. Both sides of politics have been circling for a number of years with the belief that they have a right to take some of this huge nest egg.
Superannuation remains a good deal for many Australians: 15% tax on entry and 15% on earnings for the life of the fund. Whilst the rich gain by far the most benefits average Australians are not doing too badly either.
In the end if the economy crashes (this is the forecast!) then all of us will take a hit and this will not be limited to the superannuation industry. To digress: this is the penalty for digging things out of the ground, importing everything and flogging off your national assets. It will come back to bite us!
Polly Esther
22nd Feb 2016
1:47pm
vote independant
MICK
22nd Feb 2016
1:58pm
I always do.
Tomaso
22nd Feb 2016
3:54pm
Bonny, that is exactly what I did, the last downturn cost me a lot, so upon retirement age I withdrew and banked elsewhere.

22nd Feb 2016
3:58pm
With the way this government is heading with their half wit ideas about tax and superannuation, you are the only safe one to be holdin' your foldin' - no one else.
micko
23rd Feb 2016
10:41am
According to SuperRatings "super funds have bounced back 80% since the GFC. Investors who fled the market after the crash for cash have missed out on all that growth. Funds are down by almost 1% this financial year but over the past 5 years the median balanced fund has grown on average 7.5% per year."
FM
23rd Feb 2016
10:42pm
Any growth in the past few years has not brought balances back to where they were in 2007/2008. At that time the All Ords was 6000+. It is now around 5000. Interest rates have been at at an all time low across that period. People who had just retired in 2007/2008 have not in any way recovered their money and their balances have been further depleted by the fact they are forced to draw down on more of their capital than would be the case if they had an adequate return that would go towards their cost of living.


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