Superannuation: why you should care right now

Superannuation: why you should care right now

Retirement may seem decades away, but with such strong performance and growth in super funds at this very moment, superannuation is finally getting its day in the sun.

After a record breaking tenth consecutive positive financial year return, ChantWest has named QSuper as one of two top performing growth funds, having returned an exciting 9.9 per cent in the last financial year.

QSuper-Top-Performing-Rate-City

Source: Chant West
Notes:
1. Where a super fund has more than one investment option in the Growth category, only its main investment option has been included in the top 10.
2. Performance is shown net of investment fees and tax. It is before administration fees and adviser commissions.  

A typical long-term objective of superannuation funds is to beat inflation by 3.5 per cent, and current figures show the top performing funds are now returning over 8 per cent above the current inflation rate of 1.3 per cent.

Such impressive returns on superannuation investments could signal a shift in consumer interest toward super funds in Australia.

Retirement-Savings-Super-Funds-QSuper

The recent RBA rate cuts and ensuing reduction on interest rates for term deposits and savings accounts have worried some long-term savers.

However, with a 9.9% return on super investments, putting money into your super for retirement could be a competitive alternative to your traditional savings tactics.

What to look out for when reviewing fund performance

A fund’s performance over one financial year may not be a reliable indicator of future performance, QSuper’s head of investment strategy Damian Lillicrap says:

“Australians should focus on long-term performance, because for most fund members, superannuation is a multi-year, multi-decade commitment.”

QSuper-Top-Performing-Funds-Rate-City

Source: Chant West
Notes:
1. Where a super fund has more than one investment option in the Growth category, only its main investment option has been included in the top 10.
2. Performance is shown net of investment fees and tax. It is before administration fees and adviser commissions. 

Hidden-Fees-Superannuation-Australia-RateCity

Fees should also play a key part in your decision making process when it comes to choosing a super fund.

A 1% difference in fees may seem insignificant, but as superannuation is a long game, over 40 years this could be a difference of 19% in your final super balance.

Remember, each financial situation is different, so the best way to compare fund fees and charges is through a superannuation calculator, such as the ASIC Moneysmart Super Calculator.

QSuper making waves

Placed at number four in the top performing growth funds in the past decade and named as Australia’s best-performing publicly available balanced option^ in SuperRating’s SR50 Balanced Index (60-76), QSuper could be the fund to watch.

Across the largest 15 superannuation funds, research from Roy Morgan joins that of Chant West to find that QSuper ranks highly, with Roy Morgan data revealing QSuper to be among the highest for member satisfaction in financial performance.

With over 100+ Australian super funds to choose from, comparing your options now with this information in mind could make all the difference when you retire later in life.

^ Based on funds open to the public. Past performance may not be a reliable indicator of future performance. This is the return for the option as it does not take into consideration the timing of contributions, switching or withdrawals. SuperRatings and Chant West do not issue, sell, guarantee, or underwrite this product. Go to superratings.com.au and chantwest.com.au for details of ratings criteria.

The views of the author are not necessarily the views of the QSuper Board. This information is general information only, and you should get professional advice before relying on this information. Past performance is not a reliable indicator of future performance. Each of QSuper’s investment options has a different objective, risk profile, and asset allocation. Visit qsuper.qld.gov.au for more information.

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Learn more about superannuation

What is a superannuation fund?

A superannuation fund is an institution that is legally allowed to hold and invest your superannuation. There are more than 200 different superannuation funds in Australia. They come in five different types:

  • Retail funds
  • Industry funds
  • Public sector funds
  • Corporate funds
  • Self-managed super funds

Retail funds are usually run by banks or investment companies.

Industry funds were originally designed for workers from a particular industry, but are now open to anyone.

Public sector funds were originally designed for people working for federal or state government departments. Most are still reserved for government employees.

Corporate funds are arranged by employers for their employees.

Self-managed super funds are private superannuation funds that allow people to directly invest their money.

How many superannuation funds are there?

There are more than 200 different superannuation funds.

How long after divorce can you claim superannuation?

You or your partner could be forced to surrender part of your superannuation if you divorce, just like with other assets.

You can file a claim for division of property – including superannuation – as soon as you divorce. However, the claim has to be filed within one year of the divorce.

Your superannuation could be affected even if you’re in a de facto relationship – that is, living together as a couple without being officially married.

In that case, the claim has to be filed within two years of the date of separation.

Either way, the first thing to consider is whether you’re a member of a standard, APRA-regulated superannuation fund or if you’re a member of a self-managed superannuation fund (SMSF), because different rules apply.

Standard superannuation funds

If your relationship breaks down, your superannuation savings might be divided by court order or by agreement.

The rules of the superannuation fund will dictate whether this transfer happens immediately, or in the future when the person who has to make the transfer is allowed to access the rest of their superannuation (i.e. at or near retirement).

Click here for more information.

SMSFs

If your relationship breaks down, you must continue to observe the trust deed of your SMSF.

So if you and your partner are both members of the same SMSF, neither party is allowed to use the fund to inflict ‘punishment’ – such as by excluding the other party from the decision-making process or refusing their request to roll their money into another superannuation fund.

This no-punishment rule applies even if the two parties are involved in legal proceedings.

Click here for more information.

Financial consequences

Superannuation funds often charge a fee for splitting accounts after a relationship breakdown.

Splitting superannuation can also impact the size of your total super balance and how your super is taxed.

Click here for more information.

What fees do superannuation funds charge?

Superannuation funds can charge a range of fees, including:

  • Activity-based fees – for specific, irregular services, such as splitting an account after a divorce
  • Administration fees – to cover the cost of managing your account
  • Advice fees – for personal investment advice
  • Buy/sell spread fees – when you make contributions, switches and withdrawals
  • Exit fees – when you close your account
  • Investment fees – to cover the cost of managing your investments
  • Switching fees – when you choose a new investment option within the same fund

How do I choose the right superannuation fund?

Different superannuation funds charge different fees, offer different insurances, offer different investment options and have different performance histories.

So you need to ask yourself these four questions when comparing superannuation funds:

  • How many fees would I have to pay and what would they cost?
  • What insurances are available and how much would they cost?
  • What investment options does it offer? How would they match my risk profile and financial needs?
  • How have these investment options performed historically?

How do you create a superannuation account?

Before you create a superannuation account, you’ll need to check if you’re allowed to choose your own fund. Most Australians can, but this option doesn’t apply to some workers who are covered by industrial agreements or who are members of defined benefits funds.

Assuming you are able to choose your own fund, the next step should be research, because there are more than 200 different superannuation funds in Australia.

Once you’ve decided on your preferred superannuation fund, head to that provider’s website, where you should be able to fill in an online application or download the appropriate forms. You’ll need your tax file number (assuming you don’t want to be charged a higher tax rate), your contact details and your employer’s details (if you’re employed).

How do you set up superannuation?

Before you set up a superannuation account, you’ll need to check if you’re allowed to choose your own fund. Most Australians can, but this option doesn’t apply to some workers who are covered by industrial agreements or who are members of defined benefits funds.

Assuming you are able to choose your own fund, the next step should be research, because there are more than 200 different superannuation funds in Australia.

Once you’ve decided on your preferred superannuation fund, head to that provider’s website, where you should be able to fill in an online application or download the appropriate forms. You’ll need your tax file number (assuming you don’t want to be charged a higher tax rate), your contact details and your employer’s details (if you’re employed).

What is the superannuation rate?

The superannuation rate, or guarantee rate, is the percentage of your salary that your employer must pay into your superannuation fund. The superannuation guarantee has been set at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

How do you open a superannuation account?

Opening a superannuation account is simple. When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You might want to provide your tax file number as well – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

Can I choose a superannuation fund or does my employer choose one for me?

Most people can choose their own superannuation fund. However, you might not have this option if you are a member of certain defined benefit funds or covered by certain industrial agreements. If you don’t choose a superannuation fund, your employer will choose one for you.

Can I take money out of my superannuation fund?

Superannuation is designed to provide Australians with money in their retirement. The government has strict rules around when people can take that money out of their fund because it wants to prevent people eroding their savings before they reach retirement.

As a general rule, you can only take money out of your superannuation fund when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working

That said, you can take money out of your superannuation fund early based on one of these seven special conditions:

  • Compassionate grounds
  • Severe financial hardship
  • Temporary incapacity
  • Permanent incapacity
  • Superannuation inheritance
  • Superannuation balance under $200
  • Temporary resident departing Australia

What is an SMSF?

An SMSF is a self-managed superannuation fund. SMSFs have to follow the same rules and restrictions as ordinary superannuation funds.

SMSFs allow Australians to directly invest their superannuation, rather than let ordinary funds manage their money for them.

SMSFs are regulated by the Australian Taxation Office (ATO). They can have up to four members. All members must be trustees (or directors if there is a corporate trustee).

Unlike with ordinary funds, SMSF members are responsible for meeting compliance obligations.

How do I change my superannuation fund?

Changing superannuation funds is a common and straightforward process. You can do it through your MyGov account or by filling out a rollover form and sending it to your new fund. You’ll also have to provide proof of identity.

What will the superannuation fund do with my money?

Your money will be invested in an investment option of your choosing.