Money
10 secret bonuses hidden in your super fund
There are plenty of tips and tricks to getting the most out of your super fund - but here are 10 often-overlooked bonuses just waiting for you to take advantage of.
By Alex Brooks
When your superannuation statement arrives in the mail each year, do you open it, check the details, and show it some tender loving care? Because it’s time you did yourself a favour – call your fund and ask questions so you too can unlock extra value.
Here are the topics you’ll raise with them.
Super gives you access to the eighth wonder of the world: compound interest
Albert Einstein (reportedly) called compound interest the eighth wonder of the world. If you understand it, you earn it. If you ignore it… you pay for it. The earlier you – and your employer, who must put in the mandated 12% – contribute to super, the harder your money works for you to provide an income after preservation age.
It’s the best tax write-off going
Australians go nuts for a tax break. We all know the words ‘negative gearing’ have helped drive investment in property, but super contributions – including salary sacrifice – are generally taxed at 15%, which is much lower than most people’s marginal income tax rate. So go on, make like a Swiss banker and put extra money into your super to avoid paying tax.
Tax-free withdrawals after age 60
This is where super really is clever. Once you officially financially ‘retire’ and turn your accumulated super into some kind of income stream, it’s usually tax-free. Like 100% tax-free. Woot!
Free or low cost financial advice (listen up – this one’s good)
Most superannuation funds – especially the big ones – offer free general financial advice (along with webinars that help you work out all the tricky things like what a transition to retirement might be or what your contribution caps are).
Super funds also offer a range of calculators and other tools to help guide your retirement decisions. Now personalised financial advice is the gold standard that can leave you with more in your pocket. And some superannuation funds do offer this. But get this: did you know you can ask your fund for personal financial advice AND THEN HAVE THEM CLAIM IT AS A TAX DEDUCTION THROUGH YOUR FUND?
Me neither! Until I checked in with the Association of Superannuation Funds of Australia (they are the people who publish the helpful Retirement Standard). They confirmed the answer is generally a ‘yes’, subject to different fund requirements.
Basically, call your fund and ask what is required to pay an external adviser from your superannuation account as a tax deduction. Many funds will give you this advice at no cost (you will have to ask!) and other funds can set it up so that you can claim the cost against your fund, too.
It gives you access to free government money
If you have a low income and make personal top-ups to your super, the government will tip in up to $500 of free money each year, too. There’s also ways to help a spouse top up their super, too.
Flexibility, choice and you get to ‘invest’ without overthinking it
You can usually choose how your super is invested – from high growth to conservative or ethical options. You can even create your own self-managed super fund (SMSF) (especially if you want to invest in assets like fine art and do lots of paperwork!). Being a member of a professionally run super fund is like having access to the very best investment advisors, without paying much more than a standard management fee.
Now the fees we pay to our fund to manage our super are a bone of contention, according to the Productivity Commission – who says “fees can have a substantial impact on members, for example, an increase in fees of just 0.5% can cost a typical full-time worker about 12% of their balance (or $100,000) by the time they reach retirement”. But it’s still probably cheaper than paying a stockbroker, gold dealer and possibly a crypto dealer, right?
Super helps you work out what you’re prepared to risk
Your attitude to money and ‘risk’ can determine your future retirement income returns. Whether you want to play it safe or risk more volatile returns, your super fund lets you dial up or down, whatever risk profile makes you happy. So learn about money styles to de-risk your retirement, and then chat to your super fund to make sure your fund is invested in the right assets for your risk profile. You can invest in a range of different asset classes – shares, property and cash – and choose which percentages you want allocated where. This means you can act like Wall Street’s Gordon Gecko, without actually, umm, being an investment hotshot.
It can pay you a retirement bonus
Here’s a trick, but there are eligibility criteria. When you reach ‘preservation age’ – usually around 60 – some funds offer their members a ‘retirement bonus’ payment. This bonus is paid from money set aside to pay future taxes that can be refunded to you when you turn your accumulated super into a decumulated pension or lump sum. It can mean thousands more in your account, so call your fund and ask if they offer it.
If they don’t, you might even be able to move your money into a new super fund that does (provided that super fund meets all your other requirements, too). Check your super fund’s Product Disclosure Statement to find out more.
Protection from creditors who come knocking on your door
Now this is dependent on various circumstances, but in many cases Australia’s Bankruptcy Act classifies your regulated super fund as a protected asset, which means it can’t be liquidated if you go bankrupt. Not that any of us want bankruptcy! But it’s good to know your super will be there for you if you ever hit that particular life mountain. Check with your fund if you’re worried about this icky circumstance coming your way.
Flexible retirement income products
As Australia’s superannuation industry matures, there are more and more clever and innovative products becoming available to help people maximise their income. The fund you accumulate your superannuation in does NOT have to be the same superannuation fund that pays you an income stream later on. And advisors like Deloitte’s Andrew Boal says clever annuity-style products are worth considering to help people qualify for at least a part Age Pension, and all those juicy concessions that come along with it. AMP have also come up with innovation-worthy income products like AMP Super Lifetime that take advantage of retirement and pension rules to maximise income streams after retiring. Annuity-style retirement income products – which help prevent longevity risk – can be worth looking into if you’re worried about outliving your money.
This article contains general information only. It is not financial advice and is not intended to influence readers’ decisions about any financial products or investments. Readers’ personal circumstances have not been taken into account and they should always seek their own professional financial and taxation advice that takes into account their financial circumstances, objectives and needs.
Feature image: iStock/standret
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