Regain control of your superannuation

Story by Newsport

by Adam Volkov

For those of you who have lived through the global financial crisis, hearing the word ‘super’ may raise your blood pressure or make you anxious about what your future holds.

The unfortunate reality is that most superannuation account balances reduced between 20% and 50% from their highs, which has forced many people back to the workforce.  I empathise with you and understand superannuation can be a complex and confusing topic for many people.

The purpose of this article is to demystify superannuation for you and provide you with a few options to discuss with your financial advisor.

The first point I would like to make is that you have a choice where you wish to invest your superannuation.  You can choose your employer’s default fund, choose another public offer fund, or manage your own superannuation fund.

The choice is yours and your employer is legally required to give you the freedom to choose.

Choosing a superannuation fund is not an easy task. There are hundreds of funds to choose from each offering different investment options and charging different fees. Industry funds offer members lower fee structures but may not offer the range of investments available in some of the non-industry funds.

On the other hand, the returns being offered by some of the non-industry funds may sound attractive but the returns after costs and taxes have been deducted may be lower.

Before choosing a fund, you should understand how much risk you are prepared to accept versus the expected returns and you should discuss this with a licensed financial advisor.

Some investors prefer to manage their own investments, either on their own account, or in consultation with a financial advisor.  For those people with at least $200,000 in accumulated superannuation, a self-managed superannuation fund may be the preferred option.

You will need to engage an accountant to prepare annual financial statements, tax returns and other regulatory information.  The financial statements will also need to be audited each year.

Costs for providing these services vary but will range from an average of $4,000 to $7,000 for more complex and larger funds. Costs may be higher if the fund is paying a pension or has a large volume of transactions each year.

The benefits of a self-managed superannuation fund include greater control over what assets the fund invests in, including direct property and shares.  A self-managed superannuation fund can even invest in commercial premises and lease it to a business owned by a member of the fund. This strategy builds long-term wealth and annual tax benefits for the business.

Given the complexity of this area and the many options available to you, we recommend you consult with your accountant and financial advisor to ensure you chose the most appropriate structure for your circumstances.

For further information, please contact Adam Volcov at [email protected] or make an enquiry the Affluenture website.

This information is general advice only and you should consult with your financial advisor before implementing any of the ideas described above to ensure they are appropriate to your circumstances.