06 Dec, 2017 Why you should give a f**k about your Super
We need to talk about super.
There’s two reasons why: first off, the Senate has just passed legislation from this year’s budget – where first home buyers can now put up to $30,000 of their salary into their supperannuation account.
Basically the scheme means you can have a bit of a tax break on your earnings, and save money for a deposit faster. You can only put aside a maximum of $15,000 per year, but you can combine forces with a partner who’s doing the same thing – meaning you can use up to $60,000.
Here’s how it works. Let’s say you earn $1000 per week. Nice one. Before tax gets taken out, you could opt to put aside, say, $100 per week into a special section of your super account. You’re then left with a smaller pre-tax income of $900.
Once you’ve found a house you want to buy (and live in for at least 6 months), you can withdraw that money from your Super account to pay for the deposit, and you’ll pay 30 per cent less tax withdrawing it than you normally would. If you end up not being able to buy a house at all? Too bad – you can’t withdraw the cash and go on a holiday instead. It’ll stay lumped in with the rest of your super until retirement.
Ok. The second reason why we need to talk about super? It’s probably your “most imporant financial asset”, according to Paul Bennetts, the CEO of a millennial superannuation fund called Spaceship.
“For the internet generation…people our age are looking at home prices eight or nine times their annual income. Can we even afford that?” Paul told Hack.
“We have to kind of build engagement around this financial asset because it’s the only thing that’s going to make the second half of our career way easier if we do the work now.”
But Paul says most people don’t even know where their super is being invested, let alone what it is.
So what is superannuation?
Paul Bennetts says super is both a compulsory savings program and an investment product.
A chunk of your wage gets taken out regularly and put into a piggy bank that you’ll crack open when you retire.
“Our government was one of the first in the world to do this – they set up a scheme where 9.5 per cent of your salary automatically gets sent to a fund manager at a superannuation fund to invest on your behalf until you retire at 65,” Paul said.
He says one of the most common questions he gets is, ‘How much do I need to retire on?’
“The question there is – how much do I need to put aside each year?”
“And the question around investment is how much control do I want to have over which assets* my super is put in,” he said.
(*assets being things like property, infrastructure or shares.)
Where does my money go?
A lot of us just don’t know where our super savings are going.
Paul says that’s crazy considering how much money goes towards our super.
“If I gave you money to go buy a car, you’d visit lots of car yards you’d talk to your friends, you’d compare…yet every year you spend thousands on a financial product more important than a car ever will be, yet we put next to no thought into where it is.” he said.
But he says you can find out.
How can we take control?
When people do the digging, they’re often surprised at where their super is being invested, according to Simon O’Connor, the C-E-O of Responsible Investment Association Australasia.
He says it is possible for you to take control of where your money’s going.
“If there are companies in there they’re not comfortable with or if there are industries they feel strongly about they should be communicating that to their superannuation fund,” he said.
“We’ve seen 35 of the biggest superfunds sell out of tobacco in the last two years because Australians are starting to communicate with [their fund managers].
“It is your money after all. It’s important you find a superfund that aligns with your own values and beliefs,” he said.
You may have to go through some complex new password creations, but you can find our more about super by:
- Calling your employer or visiting their website: you can find out what superfund you’re with and how much you contribute
- Logging into your MyGov account: you can find out how many superfunds you have, consolidate them, and get links to their websites
- Visiting your superfund’s website or calling them: you can find an Investment Disclosure which tells you where they put your money
- Researching superfunds that match your values: you can use a site like Money Smart or Responsible Returns.
How many times are you paying for life insurance?
Paul Bennetts says the first step people should take is consolidating their superfunds – if you’ve had multiple employers, you’ve probably had multiple superfunds, so you’ll need to gather that money and put it in one place.
“The easy win is to look at where your super is right now and consolidate it into the fund of your choice,” he said.
He says having multiple funds is a problem as there is duplication of fees across multiple funds for starters.
“The other big issue is with life insurance – everyone gets defaulted into life insurance when you sign up to a superfund, and you have to opt out,” he said.
“So if you have two or three funds you could be – and most likely are – buying life insurance from more than one fund.
“Are you a cat? Are you planning on using life insurance more than once?”