Tags: Free money and finance advice. Financial Counsellor. Retirement funds. Nest egg. Superannuation.
with Peter Dallimore
Peter Dallimore is a volunteer Financial Counsellor at the Bribie Island Neighbourhood Centre
Super is a great way to build up retirement savings in a low tax environment and choosing a fund with a long-term track record of delivering above-average returns after fees are deducted can make a significant difference to your retirement nest egg. To find out if you can choose your fund check the Australian Taxation Office’s website “choosing a super fund”. Apart from Self Managed Funds there are four basic professionally managed super fund categories.
Retail Funds that are usually run by banks or investment companies. These funds are usually open to anyone, they often have a large number of investment options, they are usually recommended by financial advisers who may be paid for their advice by fees and/or a commission ranging from mid to high cost and the company that owns the fund aims to retain some profit. Not For Profit Funds commonly referred to as Industry Funds, put profits back into the fund for the benefit of all members.
They are generally low to mid cost funds and usually have a smaller number of investment options. Public sector funds were created for employees of Federal and State government departments. Most are only open to government employees. They generally have very low fees and offer a modest range of investment choices. Corporate funds are established by employers for their employees.
Funds run by the employer will usually return all profits to members Those managed by a larger fund may offer a wider range of investment options They are generally low to mid cost funds for large employers but may be high cost for small employers. Fees and investment earnings have a significant impact on the amount that you will have in your fund at retirement so its important to consider both when choosing a fund. Ideally your fund will have below average fees and above average returns.
It’s well worth taking the time to check how your fund or funds are performing compared with the best in the business. There are some 200 funds to choose from and fund ratings companies such as SelectingSuper, Chant West and SuperRatings provide performance data to help you compare fund performance over different time scales. Given that super is a long-term investment it is performance over the long term that counts. Whilst past performance is no guarantee of future performance the ratings tables will show you how consistent a fund’s returns have been over time.
Individual funds will generally offer a range of investment options from low risk low return for example bank deposits, to high risk high return shares or other traded products. If you’re young you can consider a more aggressive investment strategy as there is time to recover from the losses that may be incurred when major financial setback occurs such as happened during the Global Financial Crisis and the collapse of the World Trade Centre. If you’re approaching retirement or retired and drawing a pension from your fund then a conservative investment strategy is probably more appropriate.
As part of taking control of your super make sure you know how many super funds that you have. There is some $18 billion sitting in 6.3 million lost super accounts. You can check if you have super that you were unaware of by registering for the Australian Taxation Office’s online services via myGov. This will give you details of all your super accounts including those held on your behalf by the ATO. You will also be able to consolidate all of your super into a single fund to save fees and maximise returns. Remember that before you close a super account check what insurance cover will be lost and decide whether or not to increase your cover under the policy that will remain.
Check out moneysmart.gov.au for more useful information and calculators to help you to build a bigger retirement nest egg.
The Financial Counselling service is free. Clients ask what is the difference between a financial counsellor and a financial planner? Financial counsellors generally work with people in financial difficulty. They are trained and qualified to provide a free, impartial and confidential service. A financial counsellor can help you get a clear picture of your overall financial situation, explain what options you have in relation to your debts and may advocate or negotiate with creditors, government agencies and others.
Financial planners, on the other hand, assist people to manage their assets by providing investment advice. Financial planners charge fees and work for businesses that hold an Australian Financial Services licence.