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Your Super and MySuper – 7 Things You Need to Know

Article By Adam Hurwood | | Financial Planning
The Government’s introduction of the MySuper reforms aim to build a more efficient superannuation system to maximise the retirement savings of all Australians. Due to these legislative reforms, super funds are now making changes to become ‘MySuper ready’.

Here are 7 things you need to know about your super and MySuper:

1. MySuper is an Australian Government initiative designed to provide all Australian members with access to a competitive superannuation product that offers a single default investment strategy (more details below) and a simpler fee structure for all members.

2. MySuper will eventually replace existing default super accounts (the accounts chosen by your employer if you don’t choose a fund).

3. The legislation requires insurance to be provided to members in the MySuper product on an ‘opt-out’ basis, ensures that all members will have at least some level of cover unless they specifically request to terminate it.

4. To keep costs low, the investment choice will be limited to Single or life stage investment funds. Examples of Single investment funds are Balanced, Growth, Conservative or Cash with the default option for most superannuation accounts being Balanced. However, Super funds vary in the way they use these terms. You should check:

  • How much is invested in shares and property compared with cash and fixed interest for each investment option; and
  • The type of assets that are included in each of these categories

Some MySuper products are offering LifeStage investment options. LifeStage funds have been used throughout the superannuation industry for a number of years and aim to be a simple set and forget investment solution. The mix of shares and property compared with cash and fixed interest will vary depending on your age. For example, someone in their twenties will generally have a higher proportion of shares and property compared to someone in their sixties who would generally have a higher proportion invested to cash and fixed interest. The exact mix of asset classes will depend on the investment manager.

Choosing a suitable investment option

Most people work for 30 to 40 years and live for another 25 to 30 years after retiring. You want your super to grow and to keep pace with inflation during this time.

A higher risk strategy may deliver higher returns, but the risk is losses in bad years. Over 30 to 40 years, it’s likely that any growth strategy will lose money in at least 4 to 6 of those years. However, there are likely to be more ups than downs.

Historically, over any 20-year period, a growth or balanced strategy has given better returns than more conservative investment options. You must decide if the likely rewards are worth the risk.

For this reason, cheaper isn’t always best when you’re trying to grow your super. In fact, the most significant disadvantage of MySuper accounts is the lack of investment choice.

5. If you are an employee, from 1 July 2013 the rate of superannuation guarantee contributions (SGC) your employer pays into your super increased from 9% to 9.25% of your salary, payable quarterly.

6. A higher concessional contribution cap applies to certain individuals. If you are over 60 (or will turn age 60 in 2013/14), your concessional contribution cap is $35,000 for 2013/14. For all other individuals, the concessional contributions cap will remain at $25,000 for 2013/14.

7. Check your beneficiaries – from year to year your personal circumstances may change. Make sure that your nominated beneficiary for your superannuation reflects your intentions. If you need help on this or other aspects of estate planning, talk to your financial adviser.

For more information please contact your Altitude Adviser.

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