Superannuation

Superannuation is intended to be a long-term savings vehicle for your retirement or to provide for your family members in the event of your death. For this reason your super benefits are commonly termed ‘preserved’ which means that you can only withdraw them when you retire, or in other specified situations. Super benefits which are classified as ‘non-preserved’ can generally be accessed anytime, even if you are still working. The components which make up your super benefit are set out on the statement that you receive from your fund.

When you retire, superannuation benefits can generally be taken as either a lump sum benefit or a pension (income stream) or a combination of the two. We recommend that you discuss all aspects of your super, including tax with your adviser.

Superannuation Fund

There are many things to consider when choosing a superannuation fund including investment options, investment performance, fees and costs, insurance cover and extra services such as financial advice.

Every super fund has a product disclosure statement (PDS) detailing:

• fees and costs
• death and disability benefits and insurance premiums
• investment strategies you may be able to choose
• objectives of each investment strategy, its risks and likely returns
• fund features and services, including complaint handling procedures

Reading through each fund’s PDS should help you compare fees and costs, the level and cost of insurance cover and investment options. But it’s also important to choose a superannuation fund that suits your goals, values and personal situation so talk to a financial adviser. They can work with your to find a fund with the right level of choice and flexibility, the right mix of investments to help you meet your goals and  good insurance cover to protect you and your family.

Superannuation Guarantee Payments

Superannuation Guarantee Payments are a compulsory element of the Australian superannuation program, whereby employers are required by law to pay an additional amount based on a proportion of an employee's salaries and wages (currently 9%) into a complying superannuation fund. These then build up over time, and together with investment earnings, can only be accessed by employees in retirement or when they meet a condition of release set-out by the Government. Talk to a financial adviser or visit www.ato.gov.au for more details.

Self-managed Superannuation

Self-managed superannuation funds (SMSFs) are the fastest-growing fund type of super fund in Australia, providing investors with greater flexibility and control over where their super is invested.

However SMSFs are not for everyone. Importantly, it is the responsibility of the members (who also run the SMSF) to ensure that it complies with all of the complex superannuation and tax legislation. The annual costs of running a medium-sized SMSF are estimated at about $2,000, meaning a SMSF is usually not advisable if the fund assets are likely to be less than about $200,000.SMSFs also involve a great deal of paperwork and responsibility on your part to ensure you comply with the regulatory requirements of running your own super fund.

So before switching to an SMSF it’s worth asking:

1. Will the benefits be worth the costs?
2. What are your motivations to make this change?
3. Is the fund strictly for retirement benefits?
4. Do you have the time and skills to run your own super fund?
5. How will switching affect your current super benefits, insurances, services and fees?

Many SMSF owners choose to outsource some administration functions to reduce the amount of paperwork they need to complete themselves. This could be to an accountant or a specialised SMSF administration service. With greater control comes greater responsibility, but the right financial advice and support can make it easier. Talk to your financial adviser before going ahead with a SMSF.