Superannuation…is the focus on your retirement, or adding profit to the financial institutions?
Is your Superannuation Fund really acting in your best interests? A recent article “Super funds aren’t working”, published in the Sydney Morning Herald (27 August 2014), suggests this may not be the case.
The article cites research by Rice Warner, a leading actuarial and superannuation industry consulting firm, which suggests that large funds are failing members as they move into pension phase.
According to Rice Warner, larger funds are not providing sufficient options or support for members as they transition to the “pension phase” of their investment lifecycle. The effect of this is that members were effectively “cut loose” and faced fewer investment options, expensive or underperforming annuities, and having to seek costly financial advice to maintain growth during retirement.
This is where iSUPER® can help!
For those of you approaching retirement age, this article may provide “food for thought” around how you should be preparing for retirement:
1. Early development of how you intend to pay your retirement benefit
Start considering your retirement benefit strategy at least seven years before retirement. This allows for strategies that can maximise your superannuation balance being put in place before retirement, resulting in increased payments in your retirement years. Strategies could include; a re-contribution strategy or the Outcome Assessment test.
2. You have been waiting 50-odd years for this, don’t get it wrong now!
An effective retirement strategy should be structured, planned and “ready to go” to avoid rushed decisions and potentially costly mistakes. Changes in legislation, how much pension needs to be paid, and what income you have outside of super may all impact on your strategy.
Planning ensures your entire circumstances are considered and there are no nasty surprises. Ad hoc strategies can lead to adverse tax implications, diminished superannuation benefits and reduced future planning opportunities.
3. Payment of your retirement benefits
Seek independent advice about all the pension options available to you. Independent advice is the key to understanding all the options. Occasionally, larger funds will only advise on (and recommend) products that are available on their platform. It is worth noting that there may be other options available that will better suit your strategy.
4. Investment choice
Investments and legislation are always changing; always ask your advisor for updates about how recent changes may be affecting your strategy. There may be opportunities that provide for better returns and more flexibility with how you invest during your pension phase.
5. Choice of fund
Not all superannuation funds offer the same services. Once you have identified your preferred investment strategy, check whether this can be executed by your current fund. If it can be executed, check whether the new strategy will incur any additional fees. Some providers will charge a range of fees to implement a pension or a more tailored strategy.