Saturday, 09 August 2014
Like many Australian employees, you’ve probably accumulated a number of different super accounts from various employers over the years. Perhaps you even have super from past employers that you’ve forgotten about. If so, effectively managing your super may become difficult.
Accumulating multiple super accounts is not likely the best strategy to achieve your long-term financial goals. But with the Government’s ‘Choice of Fund’ legislation it’s easy to consolidate your super accounts, reducing the risk of losing track of valuable super.
For Carol-Ann, a 35-year-old contractor, she counted 14 super accounts over the course of her career to date.
“I’ve been a contractor for many years, and my super accounts were like weeds – they seemed to pop up everywhere,” she said. “I’m receiving statements for three super accounts which I know I have to roll over, but I know I have another four accounts for which I’m not receiving statements.”
Pick or stick
With Choice of Fund, employees can elect to have their super contributions paid into their existing fund at the same time they give their tax file details to new employers. Or, they can choose to contribute to their new employer’s super fund.
But occasionally it isn’t that simple.
Sophie, a contract graphic artist, found she couldn’t use a former employer’s fund.
“I found out that you can’t use a fund which was in a former employer’s name. So I set up funds with each of the agencies I work through. That’s three agencies, and so three separate accounts,” she said.
Sophie is in a common position to many Australians. “I think I’ve got about six funds open at the moment, and I know I should do something with them, but I’m not sure what to do.”
Although small, inactive super accounts under $1,000 won’t be eroded by fees and charges, they won’t earn much in interest either, and they probably won’t keep pace with inflation. For amounts over $1,000, fees, charges and any insurance premiums are still deducted which may erode the account balance.
Sophie’s best course of action would be to open a personal super account and combine all her super into the one account. Doing this will increase her earning power and ensure fees are only being charged on the one account.
Many put off consolidating their super funds because they think it will be too hard and too time consuming or they’re just not sure where to start.
“I only got serious about consolidating recently,” Carol-Ann said. “I’ve had my personal super account since I was 26, and I consolidated my super about five years ago. But I’ve decided this year is the year I’m going to get it all together in the one account and make additional super contributions.”
What’s in a name?
What happens if you move around for work? Carol-Ann said she moved states taking on various contracts. She received a letter from the Australian Taxation Office advising of additional super accounts.
“Because I’d moved around, I suspected there were other funds out there, but hadn’t expected to find four funds with amounts totalling $26,000 – including an amount from my first job ever,” she said.
“What really surprised me was that fund was lost because my name was incorrect on the database, they made my name all one word. I found it because my tax file number and date of birth were correct.”
Benefits of consolidating
Choice of Fund means Australian employees can simplify their retirement savings by having just one account. And consolidation reduces the likelihood of losing part of your retirement savings.
Sophie, a self-confessed saver, said she wanted just one account to ensure she didn’t lose any of her super.
“I work hard for my money so I want to make sure I don’t lose track of any of it.”
Superannuation is a major investment used to achieve your desired lifestyle in retirement. It contributes to a large component of your wealth so it’s important to manage it accordingly.
Whether you have a central fund which you roll all your super into, or you use your new employer’s fund and roll over existing super as you change jobs, it’s a good idea to keep it all in one place. This allows you to manage the investment strategy of the account to match your risk profile and stage of life you’re at.
If you think you have lost super accounts, visit www.ato.gov.au/super or alternatively speak to us. We’ll be able to help you quickly and effectively manage your super savings in the one fund.
About The Author
Senior Financial Planner & Director
Nick Girle is a leading expert in personal finance who has been providing families with financial advice for 20 years.
He works with the types of families that aspire to use their financial and intellectual resources and are willing to put in the effort to rid themselves of all of their money worries.
Since embarking upon his Financial Planning journey Nick Girle has brought comfort, security and peace of mind to thousands of client’s financial lives through a process that ensures complete understanding of a family’s financial hopes and dreams.
He became involved in the Financial Services industry initially with the Suncorp group before taking on a Senior Planning role with NAB Financial Planning and then established Common Cents Wealth in 2011 to better help him spend more time focussing on what’s important – a client’s ultimate financial success.
Together with business partner Richard Brannelly he runs CommonCents Financial Planning.
Email or call 1300 376781 today for an appointment and CommonCents Financial Planning will give you the answers you need to worry less about money and achieve the lifestyle you’ve always dreamed of.