Start turning your ordinary-annuation into superannuation

Superannuation has certainly evolved over the years into what it is today. Having been around for a lot of this evolution I can assure you there have been some shocking incarnations. For example, back in the 70’s and 80’s, only 20% of the workforce was in any form of super – mostly Government employees, who were given a pension for life no doubt as a trade-off for 40 years of boredom!

But in the private sector, it wasn’t so generous, those lucky enough to be offered super had to con- tend with the ludicrous concept of ‘vesting’. This meant that leaving a company in less than 2 years, you forfeited your total contributions. After 2 years employment, a sliding scale of benefit payment then kicked in. If I recall correctly you needed to be employed for at least 10 years before you received your full balance on the resignation.

Why anyone would put up with this astounds me today, but it was actually seen as normal back then. By the way, the vesting concept was courtesy of our large insurance companies who were the suppliers of the corporate super funds.

These days we are far more fortunate with not only the fairness of the system but also the variety of providers available to us. I know it hasn’t stopped people being disgruntled on occasion; caused mainly by market volatility reducing balances, but it certainly has instilled a greater level of confidence in the retirement system.

It is by far, easier to interact with our superannuation providers today than it was even 5 years ago. Unfortunately, even with this ease of access, lots of people are failing to really become proactive with their fund, and have waited till they are closer to retirement age before making any real effort to improve their outcomes.

So if you haven’t done so already, it’s time you got more proactive with your super fund, and the best place to start is by looking at your 6 monthly statements. Normally, most people are only interested

in the balance and how much they made. When times are bad, it is all about how much they have lost. But there is actually a lot more we can get from the statement and you should be ready to devote at least 30 minutes to have a really good look. Consider this activity to be retirement planning.

The seven-point checklist

Personal details – Make sure everything is correct; address, contact numbers etc. Check that your date of birth is recorded correctly. Remember to let your fund know when you change your address or contact details to prevent any of your funds ending up in lost superannuation.

If you are going overseas for an extended period, change your addresses to your parents or a relative/friend. Make sure that your tax file number is recorded, particularly if you have a couple of funds.

Check your Balance – Have a look at the balance and contributions page of your statement. Is your employer paying into your fund regularly? If not, get straight to them and find out why they aren’t. Most employers usually deposit to your fund on ‘payday’, but they are only obligated to pay their contributions quarterly, so keep this in mind Did you transfer balances from other funds during the year; – is it in your statement?

What about your balance, does it look about right? Take note of the fees and charges, investment earnings (hopefully there will be some) and tax. If it seems in any way odd, contact the super fund for an explanation.

Your Employer contributions – Check all of your employer’s contributions; are they the correct amount? Unless your salary changes, your super contributions will always be the same, so keep your eyes ‘peeled’ for anything that deviates from the’ norm’

Your own contributions – Did you make any personal contributions during the year? Do you salary sacrifice? If you do, make sure everything is accounted for. If you do salary sacrifice there is a loop hole with the system that employers are short changing their employees. I have written a post about this, so take a look to see if it may apply to you. Check this post for info.

Fees – Just look for the largest figure on the statement! – only kidding. Check out the fees you are paying on your account. There are different ways you will be charged, but usually, the statement has a total cost somewhere. Get to know the price you are paying and decide if it seems reasonable. Even if it does, it wouldn’t hurt to compare your fund with similar funds in the market to really be satisfied.

Insurance – Most funds now have a default death cover amount that is automatically applied to you. This could be calculated as a multiple of your salary e.g. cover may be 4 x Gross salary or a fixed amount, whatever it is, check that it suits your current situation. Your fund will alter the amount of cover either up or down, you just need to get on to them. Before you do anything though, read about personal insurance here, and then talk to a licensed insurance professional or your fund for guidance where required.

Investments – This is the ‘main game’ Are your funds performing? Consider all the macro environ- mental influences; don’t be overly critical if we are going to a ‘bear’ market. Check if there is too much risk in your current investment option or maybe there isn’t enough. Make sure when you’re making comparisons, both with options inside your fund as well as alternate funds, that you under- stand your risk profile and how it corresponds with investment options. Otherwise, you may end up in a real ‘pickle’!

Your current fund should be performing in the top quartile consistently, so use comparison websites to check. Here’s a favorite of mine – The Fat Cat Funds Report – check if your fund is a ‘Fat Cat’ or not.

Superannuation statements are generated on a six monthly basis so this little checking process should become a bi-annual event. You can also choose online access if you prefer far more immediate information. Whichever way, keep a tight ‘rein’ on your fund and act immediately something looks wrong.

And remember, acting doesn’t have to mean transferring to another fund, rather it could be just contacting your fund and making a few changes.

Whatever the case you must be looking at your statements regularly, superannuation may be a very long-term investment but it performs the best when it is managed in a short-term way.

The most disgraceful treatment of a customer

Although we live in an age with some very robust consumer laws, there are still companies, no matter their size, who will stretch the limits of acceptable consumer behavior. You only need to look at Choice’s site to see examples of this across all industries. ‘Caveat emptor ’the Latin for‘ buyers beware’ is probably the phrase most oft-quoted when a case of corporate skullduggery is revealed for all to see.

The phrase succinctly encapsulates the notion that, greatest responsibility always resides with the consumer, rather than the merchant. And yes, we buyers must always be alert to the tricks and scams that have been perpetrated on us since the beginning of commerce.

But what if we are dealing with a corporation that happens to be one of the foundations of which the economy is built on. A company where absolute trust, honesty, and integrity are the very essence of its business and have been for over a hundred years?

How on earth, could consumers ever be expected to take ultimate responsibility when they are provided with shoddy goods or services from such a company? But wait; what if that company also operated in an industry where the major participants all acted exactly the same way. What chance would any consumer have of fair treatment?

The Australian Securities and Investments Commission (ASIC) have recently released ‘Report 499 Financial advice: Fees for no service (REP 499)’ and it certainly details exactly what little chance consumers have when a whole industry treads a path of dishonesty. Quite simply all of our major banks along with AMP have been continuously charging their financial planning clients fees, for services that were never supplied.

The length and breadth of this transgression as detailed in the report represents in my opinion, some of the most deceitful, dishonest bastardry ever perpetrated by a bank on their clients. If ever you wanted proof that something was broken in our banks, read this report.

They only stopped the practice when new laws requiring continuous client consent for all ongoing fees were introduced. I recommend you read this report; it will certainly open your eyes about a once noble profession.

Thanks for reading and see you next time