3rd Jun 2015
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Super or high-interest account?
Super or high-interest account?

The lowering of the cash rate by the RBA is prompting people to consider other options to maximise their savings. So Gaye would like to know if super is a good alternative.

Q. Gaye
My husband hasn’t yet reached Age Pension age, but does not work. He has money in a high-interest bank account, but with the cash rate going down, would he be better off putting his money in a super fund and starting a pension account?
 

A. With bank interest rates being reduced, it is a good time to look at how your money could work better for you, especially if this is your only source of income.  As we are not licensed to give financial advice, nor know the full extent of your financial position, we can't comment as to whether or not this would be the best course of action. However, some of the issues you should consider include:

  • any penalties you may have to pay when removing your money from a high-interest account
  • the fees and charges involved in a super account; even though it can be the most tax-effective way to plan for retirement, paying a lump sum into superannuation may not deliver the tax-effective savings for which you hope
  • the type of pension account your husband starts, as it may also affect any Centrelink benefits he receives, or hopes to receive.


I would suggest that before you make any financial decisions, you make an appointment to see an independent financial advisor to find out how to best structure your finances. You can also make an appointment to see a Centrelink Financial Information Services Officer who will be able to give you information on possible options. You can do this at any time, whether or not you’re a current Centrelink customer, by calling 13 23 00.





    COMMENTS

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    MICK
    12th Jun 2015
    10:35am
    My husband "has money in a high-interest bank account"? 4%? Kidding right?
    The whole system has been thrown onto its head since the GFC as interest derived from savings are pitiful. At the same time that self funded retirees are being hit at the bank account we have this deadbeat government telling us that we are living in "the age of entitlement" as they try to drive retirees into a poverty existence.
    Ruby
    12th Jun 2015
    10:42am
    Mick grow up. It sounds like you have made some not so good choices in your life. The reserve bank controls the interest rates. That was given them by a so called " best Treasurrer in the world" to take the heat of the then government.
    Ruby
    12th Jun 2015
    10:37am
    Forget about tax advantages or disadvantages. What ever you and your husband decide please make sure ( in writing ) that the fund is capital secured.

    High interest yeald can mean capital not secure (if not with a bank) sometimes it is better to forego higher interest rates for security.

    If you use a superfund use one that is industry related or where salespeople don't receive commissions every year that your money is in the fund. It will eat away your return more that the taxes that you pay.

    12th Jun 2015
    11:19am
    High (Hi) interest rates are better referred to as "Bye" interest rates these days. Should you find one which is 4%+ think a few times about going there and, if you do invest, make sure the "organisation" is an ADI (Authorised Deposit-taking Institution) so it is backed by the Commonwealth government guarantee. Also, be vigilant and shop around when your investment is maturing and you want to invest for another term. Be alert and you could gain better interest and, besides, the world needs more "lerts". And keep smilin'.
    shirboy
    13th Jun 2015
    2:32pm
    I recently placed money into a 3 month term deposit & I thought it hilarious that my building society gave a better interest rate than the Commonwealth Bank.(I took great delight in informing the bank re the rate) the poor fellow looked like he had "egg on his face".
    Bow Maker
    1st Mar 2016
    2:22pm
    Most credit unions, mutual banks etc do better rates on term deposits than the big banks, but they are still not that good for self funded retirees to get excited about.


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