If you stay with the default super fund provided by your employer there’s a chance you’ll miss out on thousands in super.
It makes sense to take a close look at your current super fund and consider whether your money could be working harder elsewhere. If you still have many years to go until you retire, there could be a way to add thousands of dollars to your final balance.
Here are a few key areas to consider when you’re thinking about the best way to invest your super.
1. Types of investment
Most super funds invest in a mix of cash, fixed interest, property and shares. When you diversify by spreading your money across different asset classes you reduce the overall risk associated with investing your super. This means if one investment performs poorly over a period of time, other investments may perform better, minimising any potential losses.
The various elements are generally mixed in different ways to offer different levels of risk. They often have names like Conservative, Balanced and Growth and you can choose your mix to match your own risk appetite.
You also have a choice of what are known as single and multi-manager funds. A single manager fund is overseen by just one investment manager or trading advisor who may be an expert in particular asset classes. A multi-manager fund can deliver diversification by drawing on the expertise of a number of specialists.
Risk is important but, when you’re considering your mix of investment classes, there are other factors to consider such as:
- your retirement planning goals
- how much super you’d need to save for retirement to reach those goals
- your age and how many years you have to invest
- any other investments you have and the returns you can expect.
Small differences in the rate of return earned by your super investment can have a significant impact on your retirement savings.
Unfortunately, it’s impossible to predict performance – and there’s no guarantee that a fund which performed well in the past will continue to do so in the future. However, APRA, the superannuation industry’s regulator, has developed a Standard Risk Measure (PDF, 325KB), opens in new window to help you compare the risk of investment options in a superannuation fund.
3. Insurance options
Most super funds include life insurance and many add total and permanent disability insurance and/or income protection also known as salary continuance. The premiums are deducted automatically from your super balance and can be lower than those outside super.
When you’re considering a new fund you should check what cover is provided, whether it’s enough for your needs and, if not, whether there’s an option to increase the level of cover. You should also check whether you can transfer your current level of cover. This is particularly important if you have a pre-existing medical condition.
You can check and compare the details by reading the product disclosure statement on each super fund’s website.
With some limited exceptions, super funds give you the option of moving your money into a fund of your choice. This gives you more control over your super and also gives you the opportunity to consolidate all of your super balances into one account so you’ll pay fewer fees and charges.
However, you may want to check whether there are costs involved or if you lose some benefits with exiting a fund or switching investment options within the fund before deciding on where to invest your super. Also, if you intend to claim a tax deduction for certain personal contributions made into your existing fund, it’s important to ensure your ‘Notice of intent to claim a deduction for personal contributions’ is made and acknowledged by that Trustee before you change funds.
Whichever fund you choose, it’s a good idea to keep an eye on how your investment is performing as well as any fees or costs. By law, your super fund must send you regular statements with details including:
- your balance at the start and end of the period
- details of deposits from your employer and any other contributions you may have made
- how much interest your investments have earned
- level of insurance cover
- any fees or costs.
Remember that visibility works both ways – it’s important to keep your fund up to date with your current contact details.
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This information is provided by National Australia Bank Limited ABN 12 004 044 937 AFSL No. 230686 (NAB), a member of the National Australia Bank Group of companies. Any advice is general in nature and has been prepared without taking into account your personal objectives, financial situation or needs and because of that you should, before acting on the advice, consider the appropriateness of the advice having regard to those matters. See the NAB Financial Services Guide for details about relationships between NAB and product issuers, and remuneration or benefits that may be received in relation to NAB’s authorised services.