Many of us take the easy default path with our super, when we should be taking control like a boss.
Many of us are ignorant about our super balance or how much we need.
The worst habit we can get into is opening a new super account with every job.
We often settle for default investments, which may be wrong for our stage of life.
Spending a little time online is usually all it takes to fix all that and reap returns.
It’s part of the ritual of starting a new job – you get handed a stack of paperwork, including a super form. Your new employer will have likely filled in the details of their default fund on this document. It’s easy to just supply your tax file number and signature and hand the form back to the HR person. The majority of us do exactly that but that doesn’t mean it’s a smart move.
As a country we haven’t done a good job educating people about super. ANZ research shows around 10 per cent of us have no idea what super is for. Around a third of us don’t know our current super balance and underestimate how much money we need to retire comfortably.
So, it’s not surprising that most people just sign the form they’re given. But it is called a ‘standard choice form’ for a reason, because it’s your choice: employers provide a default fund to make things easy for staff. But your employer can easily arrange for that 9.5 per cent of your salary to be directed to the super fund of your choice, and you should probably make sure they do.
Your money, your choice
Exercising your right to choose your own super fund is important for two reasons.
You’ll probably move between jobs, especially earlier in your career. If you join your new employer’s default fund every time you do this, you’ll end up paying multiple sets of fees. Around 43 per cent of adult Australians have more than one super account. This partly explains why we pay $31 billion in fees every year.
Super funds differ in terms of their fees, performance, the insurance they offer and even how user-friendly their websites are. Your employer’s default fund may not be right for you.
How hard is your money working?
Once you’ve settled on one super account, you can choose your investment mix – high-risk and high-return growth investments, balanced, or low-risk and low-return ones. Generally people tend to invest their super in riskier growth investments when younger, given there is more time and select more conservative options when nearing retirement.
If you don’t select an appropriate investment mix to suit your life stage you could find yourself earning a low return or alternatively risk losing in a market downturn. If keeping track of your super risk and returns isn’t something you’re comfortable with, certain funds can make life easier by managing it for you through lifestage investment options.
Steps to take control
It’s easy to get on top of your super. Spending a little time online is usually all it takes to make sure you’re in a fund that’s a good fit and that you’re not paying unnecessary fees. Online you can also access prefilled Choice of Fund forms to email your employer.