Does your super need a spring clean?
If your super is looking a bit neglected, don’t panic. Here are three easy ways to give it some care and attention that could end up making a huge difference:
- pay your super first
- choose the right investment option
- find lost super (we’ll even do most of the work!).
1. Pay your super first
By diverting 5% of their pre-tax salary into their super, a 40-year-old earning $75,000 a year could be $232,000 better off at age 65.*
If you’re employed, ‘paying your super first’ before your salary hits your bank account can be a really painless way of turbocharging your savings.
Sometimes called ‘salary sacrifice’, this strategy lets you grow your super and pay less tax. What this really means is that usually, your take-home pay reduces by less than the extra amount going into your super.
Worried you’ve left it too late?
Even someone aged 55 and earning $95,000 a year would have an extra $62,000 in their pocket ten years later, if they also transfer 5% of their ongoing gross salary into their super.
Can’t spare much extra for your super?
Salary sacrifice can still be a smart thing to do even if it’s just small ongoing amounts. As the chart below shows, a 35-year-old salary sacrificing just $20 a week could end up well over $100,000 better off when they retire.*
Want to start paying your super first?
- decide how much of your gross salary you want to put into your super each time you get paid
- ask your employer’s HR or payroll department to arrange this – usually you just have to fill in a quick form.
Know your limits
There are limits on how much you can contribute into your super in each financial year, with additional tax payable if you exceed them. Ask your adviser, or learn more.
2. Choose where your money is invested
A 40-year-old who switches from a ‘balanced’ to a ‘growth’ investment option could have an extra $248,000 at age 65.‡
If your super money is invested too conservatively – meaning it’s mostly in defensive assets like cash and fixed interest rather than growth assets like shares and property – it may not grow fast enough to eventually fund you the retirement lifestyle you imagined.
The chart below shows what $10,000 invested in each of the five main asset classes back in 1980 would be worth today.^
Know your risk tolerance
However, switching to a more growth oriented investment option comes with a higher level of risk and greater likelihood that your investment returns will be more volatile. For example, take a look at the chart in our article ‘How has your super performed recently?' to see how the Suncorp Growth and High Growth Portfolios have delivered much higher returns than the Suncorp Secure Portfolio, but have experienced more ups and downs (especially during the GFC).
Things you might consider in choosing your investment options are:
- your attitude to risk
- your investment goals
- how long to go until you plan to retire.
Our risk profiler an help you understand your appetite for risk and which type of super investments might suit you best. And of course, you should talk to your adviser before taking action.
How to switch investment options
It’s easy – you can do it all yourself online. Log in to your account via the ‘Superannuation’ login at the top right corner of suncorp.com.au. Or download an investment change form at suncorp.com.au/super/forms-documents
3. Find lost super
If you’ve had more than one job, moved house or changed your name you could have lost super.
There are over six million lost super accounts out there with an average value of around $2,800† – so it’s worth us checking for you.
Simply complete our online form at suncorp.com.au/lostsuper, giving us permission to use your Tax File Number (TFN) to search for your lost super with the Australian Taxation Office (ATO). We’ll do all the digging to find any lost super you may have.**
If we find super money being held by the ATO or other super funds, we can help you transfer it into your Suncorp Super account.
* Assumptions: the additional retirement savings are expressed in future dollars and are in reference to extra funds on top of a base scenario, which assumes 9.5% Super Guarantee increasing to 12% (as currently proposed), no salary sacrifice, no one-off non-concessional contributions, no consolidation of lost super and no career breaks. Contributions are made at the beginning of the year and earnings are calculated at the end of the year. Indexation is at 3%.
‡ Assumptions: super is currently invested in a balanced investment option earning 6.5% a year gross investment return, is switched to a growth investment option that earns an annual return of 8.5%. Remaining assumptions are as per the paragraph above.
^As at 31 December 2013. Assumes no acquisition costs or taxes and that all income is reinvested. Source: Andex Charts Pty Ltd.
†As at 30 June 2014. Includes lost and unclaimed super. Source: Australian Taxation Office.
**By completing the online form you consent and authorise Suncorp Portfolio Services Limited ABN 61 063 427 958 AFSL 237905 RSE licence number L0002059 to act on your behalf and search for lost super with the ATO SuperMatch database using your TFN.. You also consent for certain types of ATO held super money, classed as Superannuation Guarantee (SG) or Superannuation Holding Accounts (SHA) special account, when found to be transferred into your super account with us. Where we find other types of ATO held super money, classed as unclaimed super money (USM), or funds held with other super providers, we’ll write to you to let you know how you can transfer funds or claim payment. Before moving your super you should consider the effect it may have on any insurance cover within your super, and other possible.