What Your Super Fund’s Annual Statement Is Telling You

How much attention do you pay to the annual statement from your superannuation fund?

Unfortunately, the reality for a vast number of Australians is that they don’t open their statements and read them or, if they do, they look at the balance and that’s probably about all.

Superannuation is a fantastic, tax-effective savings vehicle to provide the means for funding your retirement. Like all vehicles, though, your super fund benefits from regular checks and tune-ups to ensure it is going to get you to where you want to be.

Think of your Annual Statement as a diagnostic report and consider what it is telling you:

• Who you are and where you live
  A lot of super monies become “Lost Super” because fund members don’t advise the fund that they have changed address or contact details. If you haven’t received statements, they may be going to a previous address or email. Similarly, if you have changed your name, marriage is the most common way, this can cause administrative issues down the track that you really don’t want to have to deal with later. Update the records now and you’ll be thankful. And make sure your fund has your tax file number – you’re not obligated to provide it, but there can be tax consequences if you don’t.

• How your funds are invested
  This is one of the most critical considerations for your super. Your superannuation monies can be invested in a range of asset classes from the conservative (cash) to the very aggressive (private equity trusts) all involving a risk vs return trade-off: the more risk you take, the better the return you expect. If you haven’t chosen how your funds are to be invested – and it is your choice – your contributions will be going into a default investment option. Whether this is the right option for you depends on your risk tolerance, your goals for your super monies and the cost of the investment option.

• Fees and Costs
  All super funds charge fees as there is a cost to administer the fund, keeping member records, preparing financial statements and tax returns and getting an annual audit. Most funds charge an administration fee that is a percentage of the funds you have invested. Ergo, the more you have, the more you pay.Some funds will cap their administration fees but not all do. It is worth having a look at the fees charged including:
  • Membership fees
  • Administration fees
  • Investment fees
  • Fees paid to Advisors (that is, if you have an Advisor – despite what some advertisements would have you believe, this is not automatic)
  • Insurance premiums.
    And remember, the more super funds you have, the more sets of fees you pay.
• Insurance
  Australia has a chronic problem with under-insurance – people not having adequate personal insurance to protect them financially. Three types of personal insurance can be held within superannuation: Life, Total & Permanent Disability (TPD) and Income Protection (IP) insurance.Super funds are not obligated to offer all three and commonly offer only Life and TPD cover. The advantage to holding insurance inside superannuation is that the cost of the premiums are met by super monies, not your cash flow. Your fund also gets a tax deduction for the premium. The trade-off is it means funds designated for your retirement are being used to pay for insurance instead.

Important things to ask about your existing insurance are:

• What is the cost?
• Is it enough (the absolutely critical question if you have a mortgage and/or dependents)?
• How are the premiums structured?
• What is the definition of TPD that the insurer applies?
• With IP cover, are there any offset clauses (benefit payment reductions)?
• With IP cover, what is the waiting period and what is the benefit payment period?

Want to know more about how Bentleys can help you?

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Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.