It’s a generally known fact that women have less superannuation at retirement than men. This is usually because of time out of the workforce raising children, combined with the inadequacy of the superannuation guarantee contributions.
How does Superannuation work?
Superannuation is saving for retirement. The money invested can only be accessed either at retirement, permanent incapacity or death. From the early 1990’s employers have been required to pay superannuation for their employees at a rate that was published by the government. This amount is a compulsory contribution and can only be made to funds which comply with the superannuation rules.
Super fund members can made extra contributions from their personal funds, and the fund can also hold life insurance on behalf of the member. Most employees can also have their employer pay into their chosen super fund, which means as they change jobs, they can literally “take their super with them”.
An indication of the number of employees who don’t consider the superannuation when moving between jobs can be gauged by the balance of lost superannuation monies currently held by Treasury. If your super has been paid into an employers default fund, always remember to arrange for it to be transferred to a fund of your choosing when you leave an employer.
What’s the best way to increase my super balance?
The value in super comes from regular, even small, contributions over a long period of time. This is because it takes advantage of the power of compounding investment returns. This means that as time goes on, the balance is incrementally increasing as investment returns and further contributions are added.
In years where there are no contributions, the fees paid to the investment manager can reduce the returns and slow the pace of growth of the members entitlements. During these years, it is necessary to review your super and discuss measures for reducing the fees being charged to the account, or change the investment mix to maximise the funds earnings. Alternatively, make small voluntary contributions which will be enough to cover the fees being charged to the fund.
To make sure that you have sufficient funds for retirement, start your savings plan early, and consider the following when choosing a superannuation fund.
• Reasonable investment fees
• Ability to make extra contributions
• A history of good investment returns
All of the superannuation fund managers are able to provide information and advice to help you make your decision. Alternatively you can use the governments website www.MoneySmart.gov.au. If you have an accountant, then discuss your situation with them, and they can point you in the right direction for the right advice.