Superannuation inc SMSF

What is Super?

Basically, super is the money you and your employer contribute to save towards your retirement. You are entitled to access your super when you meet certain conditions under super law. Generally, it is comprised of the contributions made to that fund for you, together with the earnings on those contributions, minus fees and taxes. As it is likely to be your major source of retirement income, it's an investment in you and your family's future.

Super is a tax-effective way to invest in your future, because of the many tax benefits.

Why do I need to invest in super?

Many Australians will not have enough super to support the lifestyle they want to lead in retirement. The December 2008 AMP Superannuation Adequacy Index, Australia's largest ever statistical analysis of Australia's retirement readiness, found that nearly 4 million or 37 per cent of workers are falling behind where they need to be in preparation for retirement. The Index recommends that retirees will need 65% of their pre-retirement salary per annum to maintain an adequate living standard in retirement.

If you're one of these workers, there's still time to boost your super.

What's the Superannuation Guarantee?

By law, employers must contribute a minimum of 9% of your superannuation salary to your super or incur the superannuation guarantee charge. These contributions are generally called Superannuation Guarantee (SG) contributions.

If you receive only the SG contributions over your lifetime, it's likely that you won't have enough to retire on comfortably. At 9% over a 40-year period, you will have yearly retirement income of about 53% of your pre-retirement income - well short of the 65 % target for an adequate retirement. Unfortunately, most people will not have the benefit of 40 years of SG contributions, for example, because of interruptions while they start a family or breaks when switching between jobs. So it's important to consider making voluntary contributions to take advantage of the opportunities offered by the super system and boost the amount available from super on your retirement.

Another reality is that the Australian population is aging. Are you wondering why this makes investing in super important. Look at the statistics below and keep in mind that the Government uses some of the income tax collected from the working population to fund the age pension.

By 2050, Australia's population will change considerably. It is expected that:

The total population will increase by 38 per cent.
The proportion of people aged 65 and over will nearly double to 20 per cent of the population
The number of people of working age (15-64) to support every person aged 65 and over will decrease from 5 people in 2010 to only 2.4 people in 2050*

*Source: Treasury projections, Intergenerational report 2010.

All indications point to fewer people being in the workforce to support the age pension. Over time, this may make a difference to the availability and amount of age pension payments.

Just 1 in 4 Australians make regular payments over and above the 9% SG
47% said getting highest possible returns was most important…BUT
At any given time up to 80% of Australians are in a a default option, which tends to be a balanced portfolio.

#Source: Cooper, J. Super System Review 30th June 2010

How does my super fund work?

Most simply, your super generally works in the following way:

Money enters your super account - from you, your employer, your spouse and the government co-contribution.
This money is invested - your AMP super account gives your flexibility and choice in the way your money is invested.
Fees, changes and taxes are deducted from your account - outgoing costs and administrative expenses.
You are entitled to cash out your benefit when you meet certain conditions under superannuation law. As you near retirement you can explore options to boost your super such as the transition to retirement strategy.

Superannuation can be very tax effective

*Top Marginal tax rate plus 1.5% Medicare levy

4 ways to grow your super

Small changes to day can make a big difference in the future thanks to the magic of compound interest. The longer you leave your money to accumulate, the more it has an opportunity to grow.

There are four key words to keep in mind when thinking about your super.

1. consolidation

By putting all your money in one fund you could:

Pay just one set of fees and charges, which could save you money
With one fund, you pay one set of fees instead of several
Make managing your super easier
One fund means one set of paperwork to keep track of, and more time for you to do the things you want to do
Be better placed to manage your super's investment strategy and asset allocation.
It's important to do some research before you decide whether or not to consolidate your super funds.
Contact your funds and find out what your current benefits are, and what will happen if you transfer your money to another fund. Make sure you find out if you'll be charged transfer, withdrawal fees or exit fees.
Compare the fees and investment options available in your main fund to those in your other funds. You should include all fees that may be charged when you transfer
If your current funds provide you with insurance cover, find out what will happen to the cover when your transfer. Check and compare the levels of cover in your new fund to ensure you are still happy with the overall cover provided.

2. contributions

3. choice

4. cover

SMSF

A self managed super fund (SMSF) offers greater flexibility and control compared to public offer funds. By establishing your own SMSF, you can also take advantage of the tax-effective superannuation environment. For these reasons, more and more people are attracted to the benefits of managing their own fund. Self managed super is now the largest and fastest growing superannuation segment in Australia.

We can advise you on the suitability of an SMSF and develop personalised advice that's right for you.