Given most of us will spend about a quarter of our lives in retirement, and superannuation is likely to be the key support for our retirement aspirations - could you honestly say you know the intricate machinations of your super fund? Apathy about the thing that is likely to support your hopes and dreams in retirement could cost you. Adviser Brendan Stone has more...
Perhaps I could have titled this article 'The true cost of apathy about the one thing that is likely to support your hopes and dreams in retirement'. Because, superannuation is that one thing. So, given most of us will spend about a quarter of our lives in retirement, could you honestly say you know the intricate machinations of your super fund?
For example, here are some hot topics in the world of superannuation that might shine a light on some things you probably aren't thinking about when it comes to your retirement nest egg.
APRA takes an interest in underperforming funds
Ask yourself, when was the last time I looked at my fund and compared it to others in the marketplace that could accept my hard-earned money? Because not only is that something a great financial adviser does as a matter of routine, but the Australian Prudential Regulation Authority (or APRA) is doing just that too. According to the Financial Review of August 31st 2017, APRA has issued a warning to underperforming funds that they believe are 'unsustainable' and were failing to deliver good results for members. If they can't prove to be acting in the best interests of members, they risk being shut down entirely.
Whilst they didn't specify which funds were being targeted, as a financial adviser we have access to information that might indicate the likely culprits. These are funds that have routinely underperformed over the last ten years, and amongst them some well-known names, including Australian Catholic Super and Retirement Fund, EISS (Energy Industries Super Scheme) Super and two superannuation funds from Westpac. So, is your super fund one of these? Or do you know how yours has compared over the long term? One of the ways to ensure you have a more secure retirement income is to ensure your underlying investments are robust and are vigilantly scrutinised to look for opportunities and threats now. If you just file away your super statement every year, you are almost certainly missing these.
How much does your super fund cost?
Those with a keen eye on their super funds may have noticed that the fees disclosed by some super funds increased this month. This is because 'RG97' came into being on the 1st of October 2017, requiring that super funds more fully disclose their real costs of operation to members. Where this appears to have been most evident is those funds which hold high levels of unlisted assets (such as direct property or infrastructure). These are often industry and corporate super funds. In the light of these changes many will reassess the value for money their super fund provides.
This has been a common default option since MySuper rolled out in 2013. Designed as a 'set and forget' strategy, it will automatically invest more conservatively as you get closer to retirement. These have been largely chosen by those who are not engaged with their super or 'tick a box' on a choice form when they start new employment. However, indifference comes at a cost. According to Rainmaker Selecting Super research, you could end up with 13% less in your fund at retirement age of 65, or 25% less at retirement age 70. On a personal level, I commonly find investors have their super invested in a way that is totally opposed to their needs or goals when they have a MySuper option.
Well all of that’s interesting, but what can I do about it?
What I've outlined above is the tip of the iceberg when it comes to mastering your retirement planning strategies and investments. Let's face it, for the majority it's understandably too hard to even contemplate thinking that something this complex can be grasped on your own, and so many delay getting the right support to achieve their goals because it seems too big a mountain to climb. However, those who have a great interactive and proactive relationship with their financial adviser can really reap the benefits of ensuring their super fund is doing everything it can to meet their retirement goals. And it is exciting, both for our clients and for us, to know that whenever we interact it will add greater certainty to your retirement aspirations. At FinNest Financial, we specialise in delivering supported and positively tangible retirement outcomes for our valued clients. But don't just take our word for it, hear what our clients have to say here!