Superannuation update #1 2014

The 10-year returns are impressive, but is your fund one of the best performers?

Top 10 returns over 10 years to 28 February 2014

Superannuation is an incredibly useful way of saving for your retirement – but how do you know if you’re in the right fund? Jeff Bresnahan of SuperRatings helps you to navigate through the complexities of superannuation.

Q. Paul

I’ve been with my super fund for 15 years. As I’m approaching 60, I’m wondering: should I start to look at the pensions offered by the same fund, or is it more beneficial to consider pensions that different companies are offering? Is there a simple way to compare the returns on different funds and products?

A. To quote an old adage, there is no time like the present to review your financial circumstances; particularly as you approach 60. Given the massive range of fees, charges, investment returns and product features offered by various funds, it is always best to do some comparative work. Whilst some funds might have a great accumulation product, it doesn’t always follow that their pension products are also first class, and vice versa. Definitely include your current fund in the process, but also consider what other pension products and features might suit your needs. Features such as being able to change payment frequencies and access emergency cash at short notice need to be taken into consideration, along with the more obvious fees and returns.

SuperRatings’ SuperSavvy website provides information on each pension product including comparisons of fees, investment returns and product features, so this could be a good place to start.


Q. Mary

Although I don’t think that accessing?a pension is quite right for me at the moment, I do like the look of one of the pensions offered by a different fund. Should I make the move now or sit tight until I actually want to start drawing down on my super?

A. You can have both a pension account and a superannuation account to manage your financial situation, so starting a pension early often makes sense. This

is because there are tax advantages associated with a pension product, even if you are not quite ready to draw down your super. The main advantage is that all earnings on your pension account are tax-free, rather than being subject to 15 per cent tax when in the superannuation phase. This means that in most cases (presuming you invest in a similar investment option) you will earn more in your pension account.

In addition, once you reach the age of 60, any amount you draw down from your pension is treated as tax-free income, so you won’t pay tax as you do on your normal income. In addition, any amount you draw from your pension, but don’t spend during the year, can be re-contributed back into your superannuation account up to age 65 – helping to build your overall balance.

There are other considerations, such as the effect that starting a pension may have on your Centrelink benefits – so before doing anything, find an advisor with whom you feel comfortable. Together you can start to map out a plan to meet your income and retirement needs. Remember, Transition To Retirement (TTR) strategies are often very effective tax-wise, but if you miss the boat prior to retirement, you can’t always go back and fix things – so early planning is crucial.





    COMMENTS

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    Nightshade
    6th Jun 2014
    1:45pm
    No one in Australia in their right mind would put 1 cent into one of these Quicksand Traps.
    Please !
    The ordinary Australian punter is not stupid - thank God.
    particolor
    6th Jun 2014
    3:53pm
    Too late !! Abbott will Grab it !!
    Retired Knowall
    6th Jun 2014
    5:08pm
    Look up the Chant West web site or the REST web site. There you can compare most of the funds in relation to fees/charges, performance etc. So far income from a Super Pension is not counted as income after 65 for Centrelink calcs, but this will change if passed by the Senate from January 2015. Existing income from pensions will be grandfathered unless the account is changed.
    When looking for an advisor you can trust, be careful, I shopped around and could not find one, so I put myself through the Deakin Uni course, modules 1 to 6 and have saved myself a fortune. I believe the best person to look after YOUR money is YOU. The course cost me some $3.5K, about the same as some advisors want each year just to have you as a customer.
    Super is just one method of saving for your retirement albeit a very tax effective one. Remember it's important to make sure you diversify your portfolio.
    The golden rules to prosperity I believe are these:
    1) Pay youself first. (put at least 10% of your pay away before anything else)
    2) Dont confuse a good wage now with financial security.
    3) Never borrow money on things that depreciate. (cars, furniture etc)
    4) Get educated in Financial Principles. Ignorance is not bliss.
    5) Set a Budget and stick to it. Live within your means.
    6 Its not how much you earn thats relevant, it's how much you send that counts. I know many with limited income (me included) that planned and educated themselves, lived by the above principles and are now self funded retirees.
    Can I suggest you read "The richest man in Babylon" for a very clever explanation of the basic fundamental principals.
    If it's too late for you and you find yourself at the mercy of our ever worsening pension system, pass it on to your kids so they at least may secure their financial future.
    particolor
    6th Jun 2014
    7:10pm
    Well I guess that's the end of My Henry the Eight Dinning Table ?? I may as well burn it to keep warm this Winter !! Tuder OO !! ERR!! Toodle OO !!
    Polly Esther
    6th Jun 2014
    5:08pm
    Oh please, please, please , maybe if you had of had the sense to join a super fund, any fund you may not now whinge so much. And it would add greatly to your pension. It would have helped you so much. Oh, hum, I think I'm flogging a dead horse. You just continue on being bitter. Oh and err incidentally, no it's not the ordinary punter that puts money into these plans (not traps) it's actually the astute intelligent person. Each to their own I guess, but I'm very happy with my super, so glad I listened to and heeded some very good advice. And no, I don't think Abbott will grab it, I'm sure he'd have his own. Ye gods!!
    particolor
    6th Jun 2014
    7:16pm
    Yes He has !! And it used to be Yours !!..
    Now if You don't mind I'm off for a Glass of 59 and a Cigar !!
    Blossom
    6th Jun 2014
    9:30pm
    There is a fund within superannuation that you can roll over into - run by the same companies including Colonial First State, Statewide Superannuation, MLC, AMP and other large companies
    I have withdrawing income from mine and not paying tax on it because it is tax free. Although I am paid very fortnight I have a higher balance than I did about 15 months ago. It is not a trap if you do it this way.
    Orion
    7th Jun 2014
    1:22am
    It wasn't Abbott, it was the Tax Office.
    It told my fund manager to send it half the contents of my account and then the manager charged me $30 for doing it. Rudd was the PM at the time but I wrote to Nick Sherry (Minister for Superannuation) and Wayne Swan (Treasurer) and never heard a thing about it.
    On two previous occasions, fund managers have 'lost' my account and the second time it was only able to be found after John Fahey (Minister for Finance) got on the job.
    And for service like this, we are charged a management fee of hundreds of dollars a year and miscellaneous charges that amount to thousands each year. My "Super" is now worth less than the sum of all the contributions of my employers and me.
    Let's face it, if Super was any good, the Government would not have made it compulsory!
    particolor
    7th Jun 2014
    8:56am
    Told Ya !!..Try Bank of Mattress !!..But don't Smoke in Bed !!
    Virginia
    10th Jun 2014
    11:15pm
    Well you must have an onion. I have spent grandly this year on my compulsory drawdown and the pension and I have more in my account now than when I retired last november.