It’s the time of year that we all roll our eyes at, the arrival of our annual superannuation statement. If you’re like me it moves quickly from the envelope to the filing cabinet, without a lot of appraisal. But as you step towards retirement that is simply the wrong way to handle it.
In fact, right now, if you are approaching or over 60, is the time to truly understand what your super statement is telling you — and to put that knowledge to work in making changes that will make things better, sooner.
So let’s take a look at your super statement today and decipher the information and insight you should be getting from it.
Each section has a few important learnings:
1. Your account balance.
Observe: There should be two amounts in the account balance section, the balance at the date of your statement, and the balance at the same time a year ago. It is a good opportunity for you to see just how much your super fund has increased in value in the last 12 months.
Your account information may show an allocated number of “units”. This is much like a “share” in a fund and it goes up and down in value based on the underlying investments. The more important thing to observe is the total value of the account balance.
In this section you may also see whether you are classified as “preserved” or “non-preserved”. This is the way a super fund describes whether you can access your super. Usually this is a change that happens when you reach retirement age.
Questions you should ask yourself: Has there been growth in my funds? Has this growth aligned with the market performance in the last year?
2. What are the fees like?
Observe: The fee section of your superannuation statement is an important area to understand. Fees can eat heavily into your retirement savings, especially over the longer term.
All funds will charge some kind of managed investment fee. These can be called acronyms like ICR or MER. You may also be paying an adviser, and other fees on items like insurances. Some funds even have contribution fees.
Questions you should ask yourself: Fees of superannuation funds are now openly published in the market, and you can compare the fees you are being charged fairly easily with other funds. But it is also important to know what exactly you are paying fees for and what you should expect to be gaining for them.
3. What is your fund investing in?
Observe: In any super fund there is usually a range of different investment options. They will span from lower risk to higher risk, and may allow for more intensive management or less intensive management in their fee structures also.
Usually, the more expensive fee structures are justifying higher returns and higher risk funds.
Questions you should ask yourself: Every person’s risk profile on investment is a little different, so it is worth your while taking the time to talk to the financial planner about what yours is at the time of life you are at and exploring what type of investment options you should spread your investments across. It makes sense to review your options annually, and as lifestyle or life circumstances change to ensure you are properly addressing your own risk/reward demands.
4. Does your statement have the right information? Have you nominated a beneficiary?
There is a very important and often not talked about activity you need to undertake on your superfund, and that is to ensure that you have nominated your “beneficiary”. You do this by completing a beneficiary nomination form and lodging it with your fund. If you have not nominated your beneficiary it can create difficulties, stress and heartache in the event of your death; in some cases the law may require your super fund to decide who the beneficiary should be.
Observe: You can check your statement to see if you have a beneficiary nominated. If not, snap into action immediately.
While checking this information, take the time to check your address, contact details and tax file number are all in order.
5. Do you have insurance and is it enough?
Observe: Most super funds have some “default” cover for fund members. This usually includes a minimum level of life, disability and income protection. As your age and lifestyle changes, so will your needs for insurance cover, so be sure to review this and explore what you think you should have with an adviser.
Australia’s biggest super fund, AustralianSuper, has this year added detailed financial projections to its annual member statements to provide members with much more clarity around what their super can do for them.
Different age groups receive different types of statements. For members aged 60 and over, the statements now show estimates of how much super they can expect to accumulate by the retirement age of 67; how many years they might expect their super to last; how much fortnightly income they can expect from their super after retiring; and how much of the age pension they’ll be entitled to, on top of their own super.
Expressing your retirement balance as a fortnightly income amount “makes your super real,” according to AustralianSuper’s Group Executive – Membership, Paul Schroder.
“Most people spend their working lives receiving a weekly, fortnightly or monthly wage, so they are not so used to very large numbers,” he said.
And Paul’s top tip for a super future?
“Ask yourself if you could put extra into super now, so you can live better in retirement.”
This information may be general financial advice which does not take into account your personal objectives, situation or needs. Before making a decision about AustralianSuper, consider your financial requirements and refer to the relevant Product Disclosure Statement (PDS). Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns. AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.