How to put the SUPER in your superannuation

April 13, 2013 at 8:09 am | Posted in Business | 40 Comments
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Your future is largely up to you.

Your future is largely up to you.

Superannuation may sound boring, but it sure beats eating cold beans under a bridge in the rain.

With families fragmenting and our population aging, more people will need to look after themselves in later years. And doing that in any kind of style takes serious cash.

A bit of super planning now could save you from very grim times down the track.

The problem is, sorting out super can be bewildering.

Fortunately, I have some pointers for you.

Get advice

Many people are reluctant to pay for professional financial advice. Yet a good financial planner can save you from making terrible decisions (or failing to make the most important ones).

If their advice means you end up with $150,000 more in 30 years, it’s surely worth a few hundred bucks now.

Happily, a recent financial services sector shake-up means planners now charge directly for their services, rather than live off commissions.

This means they can advise you without the distraction of incentives.

So don’t just rely on my advice; speak to a money expert!

Compare funds

There’s an astonishing variety of super funds out there. But if you’ve watched TV in the last few years, you may have noticed the rise of ‘industry’ funds.

These funds are designed to help their members. To this end, they have lower fees – which can really make a difference to your payout.

‘Commercial’ super funds, on the other hand, are designed to make a profit while serving their members. This could be seen as having ‘two masters’, with a resulting dilution of focus.

So, if you’re feeling overwhelmed by choice, see if there’s an industry fund for your line of work. It could serve as a very handy benchmark, and it may even be your best option.

Future proof

One interesting trend is the rise of ‘ethical’ super funds.

While formerly the domain of tree huggers, there are now very sound reasons to check these out.

Not only do you get a warm fuzzy from putting your money where it won’t hurt people, animals or the planet, ethical investments can be very in tune with global trends.

For instance, a fund that’s skewed towards medical technology, renewable energy and recycling may be a far better long-term bet than one heavily weighted with coal, tobacco and iron-ore investments.

So, when thinking about your future, factor in the future.

Your turn

What’s your super scheme like?

Is it going to look after you in years to come?

Have you found a scheme that offers everything we’ve discussed and more?

I’d love to hear your stories (good and bad) so we can take this vital discussion further.

🙂

Brought to you by The Feisty Empire.

40 Comments »

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  1. A tip for those uninterested in their Super is to choose an option that allows you see the actual underlying investments. One that offers direct shares in companies you use every day like Woolies, Telstra, ANZ etc. You are more likely to support something when you see how the investments make their money. Many managed funds will show the Top 10 investments and is shows you how they invest and that transparency helps build your confidence. Many Industry Funds, retail Super Wraps and of course an SMSF will now allow you that control and transparency which builds interest in actually using the system.

    • Hi, Liam! I’m so pleased to have caught the eye of an industry heavy hitter! 🙂 I like your idea a lot and was appalled at the sort of stuff my old super fund was investing in. Now that I know how deeply Woolies are into poker machines, I’m also glad they’re not in my portfolio. It’ll be interesting to see if super becomes a way for ethical types to effect change in the world. Or am I dreaming on that one?! Thanks so much for adding value and credibility to our debate, Liam. Kind regards, P. 🙂

      • Ethical or Socially Responsible investing is not only a good moral idea but also tends to lead to the choice of companies that have top quality managers with morals and ethics themselves. These are often the best long term performers in the market as quality comes to the top!

        • That is VERY encouraging to hear, Liam. Many thanks! 😀

  2. Super, snooper, pooper…

    Recently (as in yesterday), my husband and I had this very discussion with a financial adviser, but to explain maybe I should begin at the beginning.

    18 years ago I started a little business and have built a nice little asset as my ‘super’. Being a ‘super age’, I’m now planning an exit from this safe little money pot and am investing time into getting advice.

    The question was, “What to do with ‘all that money’?”.

    Our avenues for advice were:
    1. Accountant (understood the tax obligations)
    2. Our bank manager (guided us on the best way to spread the excess funds)
    3. Superannuation fund (advised us on the ratio of $’s in:tax benefits, worth the money…FREE)
    4. Financial planner (still scratching our heads to the usefulness of this exercise, see below)
    5. Family, friends and colleagues (shared their experiences, honest and fair)

    After chatting with an accountant, our bank manager, family, friends and colleagues and two superannuation funds, in that order, we prudently booked a long telephone meeting with a financial adviser to discuss my timely exit.

    In my lifetime this is the third meeting we’ve had with a financial adviser and maybe our expectations were unrealistic on all occasions but it seems to be ‘a nice catch up with a stranger’. After 15 mins and 3 call backs (due to a bad mobile telephone connection) later, we ended our session 45 mins early.

    Yesterday, his advice was;
    1. “Be careful of ‘sharks’ and ‘get rich quick’ investment schemes” errr no kidding.
    2. “Talk to your banking institution about your financial obligations” you don’t say! (sarcasm)
    3. “Talk to your accountant” errr done that
    4. “but don’t trust the account with your tax obligations” really? (more sarcasm)
    5. “Talk to the tax office for the best advice on your tax obligations” at this point we’re wondering why we are having this conversation?
    6. “Talk to your family” are you kidding?
    7. “Telephone your superannuation fund” he can’t be serious! Fair enough, but do I have to pay for the privilege?

    The best advice is ‘do your homework’, superannuation is only a small part of a big puzzle.

    • Dear Tina, comments as generous as yours make this whole blogging caper worthwhile! 🙂 I’m deeply grateful for your full and frank contribution. Though I’m sorry you didn’t have a more positive experience, we often learn much from the ‘wrong’ turns of others. So, on behalf of me and our other readers, many thanks for the share! P. 🙂

      • Bless you for being so generous and offering your space to vent! Happy days ahead 🙂

        • Tina, you can vent here ANYtime! 😛

      • Tina, I hope someone mentioned Small Business CGT concessions, your desired income from your nest egg, how much risk you are comfortable with, the options in terms of super and non-super investment vehicles and risk and Estate planning measures. All these come first before any investment product. Good luck.

        • By gum I’m having a good morning! It’s ace to get commenters. But when they start talking to each other, it’s jolly well sublime! 🙂

          • Sorry for that Paul, I see so many people focusing on the investments and tax instead of lifestyle and creating a steady income in retirement with some degree of “the sleep factor” that is the ability to sleep and not be worried about the investments daily.

            • Sorry?! Don’t be sorry, Liam! My posts are merely a point of departure. To attract wiser minds and have them commune is a big reason this blog is here in the first place! Please keep contributing however you see fit. 🙂

              • No problem Paul. Do love a good chat…..Then again I am Irish so that’s to be expected!

                • My wife and I got married in a pub by an Irishman, so I think we’re going to get along just fine! 🙂

        • Hi Liam,
          Paul has kindly shared his pertinent research and I’m not meaning to be petulant. The superannuation choices view from my ‘balcony’ is like ‘pretty flowers in a field’.

          Essentially we are on a fact finding mission, ready to get down to the business of choosing the ‘field/s’ from which to pick the ‘flowers’. Before the meeting and after our talks with all aforementioned parties, my husband and I had openly discussed our plans/ideas. Small Business CGT concessions, unfortunately not, we had hoped for this type of advice from our meeting with the financial adviser. Risk, desired income, super and non-super investments were ‘concepts’ mentioned in the meeting but no detail. The words were thrown about like sugar at a local fair and like the sugar at local fair, deeper investigation found a bag full of air with a few crumbs in the bottom. Blah, blah, blah.

          This is not the end of the story but rather a snapshot of a near ‘super aged’ persons desire to make savvy choices.
          Onward and upwards.

  3. A dangerous invitation…beware the sting!

    • Woops, I meant to reply to your comment.

    • Some of our best debates have sprung from a sting. Bring it on, I say! 🙂

  4. We gave the celebrant a pint of that before he started and it seemed to do him a lot of good. 🙂

  5. Hi Paul,
    The concept of Super is interesting and while it’s an excellent imitative from Governments to enforce savings it really won’t be enough for us to live on in the future, in my opinion!

    Sorry folks! As we know the amount paid into Super is a direct proportion to your salary (9%) however for those on a low income it’s a relatively modest amount and they often can’t afford to top it up.

    For those on a higher salary the government has provided a disincentive to pay additional funds into Super as they have removed the tax benefit for anything over $35,000 (up until last week it was $25,000) and are talking about ways of taxing those again who have larger amounts and earn interest on that money.

    That’s crazy when you consider that the purpose of Super is to enforce saving (9%) of your salary so that when you retire you aren’t on the government pension. So which way do they want it? Self-funded retirees or people on the old age pension?

    Another pitfall is the fact that they tell us it’s ‘our’ money but we can’t touch it until we are a certain age. This age is set to increase to 67 as people live and work longer and we have no guarantees about how it will be taxed at that time in the future.

    With the large number of baby boomers retiring, the government may not be able to afford for people to take their ‘lump sum’ payments. They tell us it’s our money but is it? What if they say from 2025 onwards that you can only take a maximum of $50,000 a year out of your fund? All that money we worked so hard to achieve is then not in our control.

    So while I agree with the idea of Super as enforced saving I recommend a secondary investment strategy that is government free and paid with after tax dollars now. My favourite is a small investment property where the deposit can be offset against the equity in your current home and the tenants pay off most of the mortgage over a decade or more while the property value doubles.

    Then when you retire you sell it, pay minimal capital gains tax because of your lower retirement income and have a really nice cash nest egg created by other people paying it off and capital gains. This, like Super, is not a short term proposition and is a commitment for your future so you can retire in the style that you deserve after 40+ years of work.

    • Dear WLBB, I love your comment for its candour, passion and authority. I’ve been totally spooked by the recent threatened tinkerings with our nest eggs. Hitherto a fan of super, I’m wary of investing another dollar in it in this climate. My accountant says I should pay my home off first. After reading your excellent comment, my next move after that may well be to buy the sort of property you describe. Thanks so much for adding your weight to our debate. Kind regards, P. 🙂

  6. Treasury has its eyes on the 50% CGT discount so while Politicans got a kick in the butt last time they rescinded it and backed down, don’t be surprised if a future govt tries this again. Diversify your investments in Super and Non-Super across a range of assets including property and use the power of compounding interest. Get rich slowly but steadily!

    • I’ll buy THAT for a dollar! 🙂

  7. I wholeheartedly agree we need to prepare for a future by saving now in some form or another. Deciding for or against super is much better than sitting and hoping she’ll be right.

    Just a quick additional comment – and it reflects on marketing as well as super.

    You note industry funds and commercial funds which is the genral understanding of fund types. However, there are other funds that have the low fees/no commisions philosophies that are not industry funds but don’t put money into the ‘industry funds’ advertising campaign. And those in that campaign don’t encourage others being called industry funds. Personally, I prefer the low fees/no commissions and no spending my money on TV campaigns but it is a less well known distinction.
    Even within the non-commercial funds it’s still worth shopping around in my opinion.

    • That’s a damn good point, Tash. Those jolly TV ads must cost a truckload. Good on you for casting fresh light on our discussion; you’re very good at that. 🙂

  8. A very good point raised by Tash! The ads are on all the time and do cost a heap’ Also health insurance, They spending millions telling us ‘we’re alright now’ but it’s not alright every second month when I recieve a letter telling me that our premiums are going up again and that I’ve lost the 30% government rebate …

    So more people drop out so the price has to go up and more people drop out …

    The system is broken and the people in charge have the intellence of a house fly.

    • Amen to that, WLBB. If I lose that damn 30% health insurance rebate too I’m going to clone my dog for spare parts. I do love it when you get cross. Your rants are sharp in all ways that matter. Thanks heaps for sharing your thoughts! 🙂

    • Good to see people with the investment cheque book having ethics and environmental awareness and brave move as to my reckoning they have basically knocked 40% of the Australian market off their “Invest-able List” once you include Woolies, Crown, Tabcorp etc as well. Not sure they will see the returns they seek from renewables but good on them if they are putting ethics above profits. The normal person in the street struggles to be so ethical as miners have been very profitable long term in most portfolios but hurt the environment. Others try to use their voting power to change company processes and I applaud that as well.

      • Great to see you back, Liam. I agree this is very brave. It’s almost enough to bring me back to God! I really hope the church’s initiative strikes a chord with some champions, so the entire flock may see the light soon. 🙂

  9. I’m SO glad I turfed the coal miners out of my super portfolio! http://www.abc.net.au/news/2013-04-20/report-warns-of-unburnable-carbon-scenario/4641144 🙂


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