Super Funds: Long term outlook
As most of you will know, Australian Super Funds have lost alot of money in the past 3months with all that is going on around the world. This is hard for people who wish to retire shortly as there money is extremely lower then what it should be due to exposure to the risk in the US markets.
Today I intend to look at the long term outlook of super funds in Australia and discuss tactics of what can be done with Superannuation in this time.
Short Term outlook of Super
Is not looking good, the markets are down and so to are our super portfolios. Some people are removing their money now so they don’t lose anymore, but remember – when the market bounces back over the course of 3-4 weeks you could miss out on a day or so of 10+ % gains, a lot more then possible in safe hold cash deposits.
LongTerm outlook of Super
Is much better then that of the short term, keeping your money in your super account will allow your money to bounce back over time. The Australian super industry is averaging a return of around 8% or higher currently.
Frequently asked questions on Super
- Is there a way I can find lost superannuation?
The Australian Tax Office has a register that records “lost” superannuation. They also now have a whiz bang SuperMatch service that is available via their web site. - When can I withdraw money?
Usually superannuation benefits are not available until you retire. The savings you have made are “preserved”, which means they cannot be touched until you reach retirement age (between 60 and 55, depending on your date of birth).
In exceptional circumstances, superannuation savings can be accessed before retirement age, for example, in cases of hardship, after death or becoming disabled. - What happens to my superannuation payments when I change jobs?
There are a few options:
· You can leave the money in the fund.
· You can ask your new employer to pay contributions to your old fund – they may or may not be able to do this.
· You can transfer or roll-over the money from your old fund into your new fund. - What if I think my disability payment should have been larger?
You can take the complaint to the fund’s internal dispute resolution process. If this is not successful you may be able to have the dispute dealt with by the Superannuation Complaints Tribunal. - What if my employer has not made compulsory contributions to the superannuation fund?
All employers must tell the Australian Tax Office about the contributions that have been made for employees. The Tax Office can audit the employer’s accounts, and charge interest on any outstanding payments, plus administrative fees. If you think your employer has not been paying, first check with them. If you’re still unsure, you can ask the Tax Office to investigate. - What happens to superannuation if I divorce?
Superannuation can now be dealt with as part of the negotiations or legal action taken where there is a property settlement. - What if I change from full time to part time work?
Your employer will have to contribute less because your income will be less. Note, if your income is less than $450/month no contributions are required. - If I change jobs, will I still be covered by the death/disability insurance from my previous superannuation fund?
Not usually, unless you come to an arrangement with the fund to continue payments of the insurance premium. - How much super do I need?
This is not a straightforward question.
Obviously it partly depends on the type of lifestyle you want after you retire. Most people’s lifestyles will be less costly in older age, because they usually no longer have to support children and have often paid off their mortgage.
The Australian Prudential Regulation Authority estimates that on average, most people need an income equivalent to about 60% of their annual salary. They also estimate that the average worker needs a total investment of about seven times their annual salary to achieve this. This requires a significant contribution over a period of decades if the contribution is in the range of 10% of salary. It is important to realise that the current rate for the age pension is about 25% of average weekly earnings (and you may have been earning more than the average when you were working). - Can I nominate a person to receive my superannuation if I die?
Yes. Superannuation laws allow us to nominate the beneficiary who we want to receive our benefits after we die. This nomination is binding.
If there is no nomination, the trustee of the fund decides who the money should be paid to based on certain rules. So to avoid disputes, contact your fund and nominate your beneficiary.
What is your long term goal with your super?
I intend to add extra to my account in this time, so that it will earn bigger gains when the market does prop itself back up. We will probably experience another one of these ‘recessions’ in the next 40 years anyway.
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