WHY SHOULD I BOTHER READING MY SUPERANNUATION STATEMENT? I’M BUSY!

It’s that time of year again – annual superannuation statement season!

We know that most people file these away after (perhaps) a cursory glance at the balance. Who can blame them? There are streaming shows to catch up on, social media to scroll through, and actual life to live.

Why should I bother (you may be asking)? After all, what control do I have over my super (you may follow up with)?

Here’s why we think you should spare a few minutes with that ‘boring’ statement.

Superannuation is a big part of your pay

Under the current superannuation arrangement for the permanent ADF, which started on 1 July 2016, members receive 16.4% of their salary (as defined for super purposes) as a contribution into a super fund of their choice. That’s equal to about 1/6 of their salary going into super.

But. Wait, there’s more…

Australia’s progressive income tax system means that most of us only take home a portion of our full salary. ADF members on average might receive 70-80% of their salary after income tax. This means that the super contribution is more like 1/5 of their take home salary going into super!

For members of MSBS it’s a little more complicated, but still substantial.

When something represents 1/5 of your income, surely it’s worth a few minutes once a year?

But. Wait, there’s more…

Superannuation is likely to be an even bigger share of your assets

For younger Australians (which includes a large number of ADF members) superannuation balances at retirement are likely to be higher than average.

Here’s an example: Even if a 20-year-old ADF member stayed at the equivalent rank of Private for the 40 years to their compulsory retirement age (CRA), factoring in only minimal ADF pay rises – both extremely pessimistic assumptions – they’d almost certainly retire with over $1 million in super.

Now imagine what happens for that 20-year-old with promotions and regular pay increases?!

We suggest you use the MoneySmart superannuation calculator to do an estimate using your own situation.

If you had any other investment potentially worth over a million dollars, you’d definitely check on it annually, right?

What should I look for in my super statement (when I’m reading it)?

Glad you asked.

When you are reading your super statement we suggest you note the following in particular:

• Contributions – money going in – paid by your employer on your behalf and any additional contributions you may have made – do they look like they are all present and accounted for?
• Fees paid – what is the total for the year?
• Returns – what was the investment return as a percentage % for the year?
• Investment option/s – what option/s was your superannuation invested in (for example ‘balanced’)?
• Insurances – are you paying for any insurance policies as part of your super – what is the cover and how much are the fees?

What can I do with the information in my statement?

Here’s the potentially fun and rewarding part. You can use the information you have just gleaned from your statement to make changes to your super that could have enormous long-term effects on your super balance and lifestyle at retirement. Some things to consider doing:

• Use the ATO YourSuper tool to compare your fund’s fees and returns to some other funds to make sure yours is performing well.
• Changing your investment option/s to one (or a combination) that better reflects your goals and attitude to risk. Your super fund should provide information and advice on your options.
• Making additional contributions next year. Could you afford to put a bit more money into your super fund for your future retired self? MoneySmart’s Superannuation Contribution Optimiser may be helpful for working out an optimal amount and their superannuation calculator may help you get an idea of the potential long-term benefit.
• Assessing any insurance you have through super – deciding whether you need it at all and if so whether it is at the right level for you and your family.  You may wish to seek financial advice on this before making a decision. The following pages from our site are a good starting point:
  • personal insurance
  • getting financial advice
• You can contact your super fund for advice on any of these things. The Commonwealth Superannuation Corporation for members of ADF Super, MSBS or DFRDB offers free personal consultations and does presentations at Defence establishments, which are an excellent way to learn more about your fund and how you may be able to set yourself up for a rich and rewarding retirement.

One final thing that is worth thinking about on an annual basis is whether you wish to make or change a binding or non-binding nomination saying who should get your super in the event that you die. A recent report by Super Consumers Australia brought to light the fact that many Australians have not done so, which could make things harder for their loved ones. The rules for making nominations vary across funds, so the best first step is to speak with yours about how it works.