YOUR SUPER
Ten years ago, the government introduced MySuper as a regulatory requirement, and interestingly neither the government nor the regulator has criticised or noted any inadequacies in the design of any platform’s MySuper investment default option since then.
However, as a wealth creation strategy, it is observed that there are design flaws present within all MySuper offerings, which can lead to sub-optimal super outcomes for individuals.
There are three basic MySuper designs:
- A fixed investment strategy, is typically balanced between growth and defensive assets until the point of retirement.
- A glide path strategy, where the asset resides in a growth investment portfolio until a certain age, at which point contributions get directed into a lower-risk portfolio.
- Then there is the life stages/cycles strategy, where the asset is methodically and progressively de-risked into defensive assets after reaching certain ages.
Individuals must realise that MySuper is a generic (one-size-fits-many) super strategy (not an optimisation strategy), with age being the only personalised variable (sometimes) considered in the equation.
IS SUPER A NATIONAL ASSET?
Like the government making it a regulatory requirement for all platforms to name their default investment portfolio ‘MySuper’, the government is now stating that super is not only a personal asset but a national asset too, and suggests using it to invest in Australia.
At some time in the past few years, both major political parties discussed defining the purpose of super in law. The discussion did not progress to legislation, perhaps because super is a personal asset intended to provide income to an individual in retirement.
Throughout the Royal Commission in 2018, there was much commentary about platforms charging ‘fees for no service’, with little attention given to reviewing the appropriateness of MySuper designs as an optimal wealth creation strategy for individuals.
MySuper was designed more like a ‘safety net’ super strategy, catching those who fall through the cracks and fail to take ownership of their super asset. The high percentage of working Australians still in a MySuper default investment option is concerning.
The current government plans to use super to fund social housing and sort out the rental/homelessness crisis developed over the last decade, partly due to record-low interest rates and easy access to credit.
Globally, we now have a cost-of-living crisis, high government debt, high domestic debt, and an unstable geopolitical situation, signalling a less than healthy economy.
GOOD FINANCIAL MANAGEMENT
Many people who borrowed money for the first time in the last fifteen years have misunderstood what level of bank interest is ‘normal’.
Many Australians are struggling financially with interest rates returning to normal levels and the rapid increase in the cost of living resulting from high inflation caused by the flood of money that entered the economy due to unprecedented monetary policies enacted during the COVID-19 predicament.
Good financial management is hard to follow as it is not a lesson well taught in the Australian educational system, and most developed countries have the same standard of education when it comes to money management.
The first wise lesson is to expect the unexpected, live within your means (if you can) and practice discernment regarding political and media rhetoric about affordability.
Budget appropriately, identify any wasteful expenditure and ensuring you only spend what you can afford. A couple with a young family experience many financial pressures and it is probable that both adults will have to work.
Traditionally, the person most able to work and the highest paid will seek promotions to earn higher and higher dollars. This involves using initiative and seeking to add value above expectations, offering support and identifying how to assist those in management positions to meet their goals and objectives.
HOW TO OPTIMISE SUPER
Super is your asset, and you must optimise it (no one will do it for you). To do this, you must get to know your super and make sure it makes as much as possible in every market cycle, depending on your circumstances.
Time flies quickly, and you will find yourself in the latter half of your career before you know it, so it is recommended to take action to optimise your super sooner rather than later. Just ask someone older.
Top Tips for the Younger Generation (Under 45’s)
- When first employed, find a source of opinion that educates you away from bad habits that can damage your career and financial progress.
- Have your super contributions paid into a product you think seems right, but wait until you have accumulated enough of an asset to justify paying for personal advice.
- Initially, opt for cost-effective limited super advice (as opposed to expensive holistic financial advice).
- Examine the cost of the service against the value to be delivered and watch the performance of your account progress.
Good limited super advice will cover four areas:
- Choice of product.
- Cost disclosure.
- Contribution strategy.
- Investment strategy.
It will also provide milestones in performance so you can evaluate whether the promises were true to label (or not).
Top Tips for the Older Generation (Age 45+)
- Make additional contributions appropriate to your specific circumstances. A little over a longer time is better than a lot over a short time.
- Review the insurance coverage you have in force within super to ensure it still meets your personal needs. Consider that the older you get, the higher the premiums. You do not want to pay for insurance cover you may no longer need just as much as you do not want to be underinsured should you need to make a claim.
- Review and update your investment strategy every 12 to 24 months to ensure the right balance of growth and defensive assets reflects market conditions expected for the cycle.
For those aged 60 and over:
- Examine the opportunity to use a transition to retirement strategy to maintain your existing cash flow, salary sacrifice more into super, save on tax and increase your super balance.
SUPERWISER
The SuperWiser client portal provides access to affordable, expert advice and service specifically focused on assisting you to manage your super towards an optimal outcome.
SuperWiser can help you make informed decisions and avoid common (and often costly) mistakes.
Complete a free Super Review.
From there, you can obtain initial super optimisation advice (including implementation) for a one-off low cost of $220 (inc GST).
Alternatively, to discuss your options directly with an adviser, book a time online, call 1800 467 467 or email yoursuper@superwiser.com.au
OPTIMISATION
Super is a personal asset. To effectively manage super as a wealth creation strategy, you must determine what you want to achieve for yourself (also known as setting goals and objectives). You must also monitor your progress against your stated expectations and adjust your strategy regularly because the value of your super asset can rise or fall, depending on investment markets.
Optimising your super asset requires making regular, informed, timely decisions aligned with your circumstances and market conditions.
The process involves analysing the potential outcomes, benefits and risks associated with available options to determine what best meets your needs and brings you closer to achieving your goals.
Unfortunately, financial literacy among Australians is varied, and research suggests that many people struggle with more complex financial dealings such as investments and superannuation, putting a high proportion of working Australians at a significant disadvantage.
Super optimisation involves an array of skills such as:
- Analysis of current and future product capability.
- Comprehension of rules around contributions, concessional & non-concessional.
- Knowledge of global economics.
- Construction of investment portfolios suitable for expected market conditions.
- Determination of appropriate insurance requirements.
Individuals who try to acquire such skills to manage and optimise super themselves can find it is a full-time job.
The challenge is not only in skills acquisition but in ensuring the maintenance of knowledge as market conditions evolve.
The SuperWiser client portal intends to meet the needs of everyday working Australians requiring access to affordable advice and service to help them avoid making common super mistakes and optimise financial outcomes for themselves over the long term.
Unlike holistic financial advice that includes all facets of an individual’s financial situation and can cost thousands of dollars, SuperWiser focuses on providing advice limited to super and costs between $0 and $220 (inc GST), depending on requirements.
All individuals with a super account are encouraged to use SuperWiser, even if only to complete a free Super Review.
CHOICE
A common and often costly mistake many individuals make with super is assuming that their existing super product will always be appropriate for them.
Remember, your circumstances are never static and constantly evolve. A super product that was appropriate 5 years ago (for example) may no longer be so now, especially if your circumstances involve a change of employer.
With the introduction of choice, more and more individuals often make the choice to stay with their existing super product rather than move their super into their new employer’s corporate superannuation plan.
Individuals who exercise choice and do not elect to join their employer’s corporate super plan, on review, may find they have mistakenly put themselves at a disadvantage.
Medium to large employers can go to market and gain a discounted fee structure and possibly cheaper insurance premiums to the advantage of their employees.
Individuals who exercise choice must conduct an appropriate analysis comparing their existing super fund against their employer’s corporate superannuation plan if they are to make an informed decision.
POLITICS
The federal government has decided it will use the nation’s pool of super assets to fulfil political goals such as solving the housing crisis and funding changes in power generation to meet climate management targets.
While the government has a voice in doing this, it appears that the owners of the asset (i.e. every individual with a super account) are silent on the issue, or their opinion is unreported, as all political parties have adopted the same policy.
Is super really a national as opposed to a personal asset?
Despite the government’s significant interest in using the nation’s pool of super assets to fund political imperatives, most individuals remain somewhat detached from their super, preferring to look at it once each year at statement time.
Perhaps this is due to a lack of knowledge about how super can be better managed and optimised to exceed expectations as a source of income in retirement.
SUPERWISER
The SuperWiser client portal provides access to affordable, expert advice and service specifically focused on assisting you to manage your super towards an optimal outcome.
SuperWiser can help you make informed decisions and avoid common (and often costly) mistakes.
Complete a free Super Review.
From there, you can obtain initial super optimisation advice (including implementation) for a one-off low cost of $220 (inc GST).
Alternatively, to discuss your options directly with an Adviser, book a time online, call 1800 467 467 or email yoursuper@superwiser.com.au
Personal or National Asset?
Super is an important personal asset, but many people fail to take the time to understand it or optimise it.
It seems that our options for managing it are reducing, and that politicians are more often talking about it in a way that is carefully crafted to dilute the idea of super as a personal asset.
Unfortunately, the idea of super as a collective national resource is becoming more widely accepted.
Politics of Super
Discussions between super platforms and the government occur regularly around how to spend/invest the nation’s $3.5 trillion of total super, and current political opinion supports super being available for investment in politically essential infrastructure projects within Australia.
But is this type of investment in the best interest of the individuals who own the asset?
Superannuation products have different ways of investing your money. One important difference is whether they invest in unlisted (not publicly traded) or listed (publicly traded) assets. Some people claim that unlisted assets are less likely to go up and down in value compared to listed assets. However, it’s not yet clear if unlisted assets really bring in higher average returns than listed assets, and the regulator is unlikely to examine this matter.
The government’s super investments are not publicly traded and are only valued from time to time. Some of these investments are considered illiquid, which means they can’t be easily turned into cash, a factor not reported on and understood by the public so far.
To a large extent, the public seems uninterested in the concept of super as a personal or national asset. Subsequently, they suffer the consequences with a suboptimal asset balance at retirement.
SuperWiser
The public needs to become aware of what’s happening with their super and learn how to manage this important personal resource. The first step is to find a reliable source of information and make well-informed decisions. But the challenge is that many individuals can’t or won’t pay a lot of money for comprehensive financial advice. As a result, they end up making decisions based on marketing rather than real facts.
There is a need for a high-quality, low-cost alternative to holistic financial advice and SuperWiser meets this need.
The SuperWiser client portal is a unique offering within the financial services industry. It provides workers in the accumulation phase of their super journey with access to quality information, service and advice to help them understand and cultivate their super as a significant personal asset.
Optimising Super
Optimal super outcomes do not materialise by accident. You must set goals, implement a strategic plan, review regularly and make updates as conditions dictate. The SuperWiser portal helps you easily manage all of this.
The first step is for SuperWiser to review your current super strategy (or lack of) and use this to calculate your baseline projected income in retirement and provide an indication for improvement.
The initial Super Review is free of charge, with no obligation to continue.
Should you decide to continue, you go through a process of confirming product selection, establishing tangible goals and objectives, implementing contribution and investment strategies based on personal advice recommendations and provided with account balance milestone targets.
A one-off cost of $220 (inc GST) is involved with setting up your improved super strategy.
Optimising super is not a set-and-forget exercise. It requires considered and consistent, active management every 12 to 24 months. SuperWiser automatically notifies you to review your super and will recommend updates to your super strategy in alignment with your goals and objectives and as market conditions dictate.
A one-off cost of $110 (inc GST) is involved with updating your super strategy.
Employer Plan or Personal Choice
When you commence work with an employer, you must decide whether to join the employer’s super plan (if they have one) or make a personal choice as to which product you want your super contributions paid into.
It is essential to access relevant information on which to base this decision.
SuperWiser can help you work out if joining an employer plan would benefit you. Choosing to stay with your existing super product (because it’s the easiest thing to do) without first comparing the benefits of joining an employer plan can be a costly mistake.
Have a Look
For younger workers, review your super (at no cost) and see if there is an opportunity to do better than you expected.
For workers with twenty years or less left in the workforce, use SuperWiser to manage your super asset so it is consistently better invested with future market conditions.
The Optimisation of Personal Super
The nation’s balance invested in super amounts to $3.5 trillion and growing.
When Paul Keating introduced the compulsory super in 1992, an industry sprang up to manage the ongoing creation of the asset. However, when you look at its history, it would appear that no one has been able to grasp how to manage this system as there has been an endless stream of controversy, re-regulation and punishments handed down to the super service providers.
The majority of people with a super account do not regularly examine their current plan until retirement. Such an approach leads to negative consequences for their projected income when they retire.
Essential Attention
If you are to optimise your super as a personal asset, you must first understand how your current plan delivers to ensure you have optimised profits:
- Your choice of product.
- The cost of your chosen product, including administration fees, investment fees and insurance premiums.
- Your level of insurance cover, dependent on your occupational classification and your current situation between assets and liabilities.
- What you can afford to contribute in addition to your employer contributions.
- Understanding your chosen investment strategy and what investment returns you can expect.
While the above might seem like a sizeable list, SuperWiser can evaluate your super plan for you and inform you of any new adjustments to your plan.
As a Source of Information
SuperWiser is kept up-to-date across a range of products and provides comparable results between products to ensure accuracy. Updates to the SuperWiser product database are regularly monitored and are also subject to scrutiny by the license holder’s Compliance Manager.
SuperWiser examines the projected income in retirement that might be achieved based on cost, contribution and investment returns. MySuper investment defaults are included for all products along with portfolios that can be constructed by using the products investment choice menu. Cost is a consideration with SuperWiser considering all fees and also insurance premiums.
Depending on government regulation around contribution caps, your future projected income in retirement can be enhanced by a modest salary sacrifice over the long term rather than a salary sacrifice bulked up in the short term.
In particular, one major difference is the active management feature in which the management of every person’s individual asset is in the reconstruction of investment portfolios over a 12-24 month cycle, instead of tthe static asset allocations of every platform’s MySuper investment default.
All of the above personal wealth creation services are offered at a fraction of the price offered by financial planners. The price of the various key services from SuperWiser are $220 to join and an additional $110 for each strategic update but you only pay if you use the actual service/update.
Success or Regrets?
In life, there are successes and regrets. The decisions you make (or not make) when you manage your super fund can end up in success or regrets. Set yourself up for success by managing your superfund well.
Contact Us
Register on SuperWiser or contact us on 1800 467 467 for a chat about how you can manage your super.
SuperWiser is a client portal for personal scaled advice, owned by Super Simpler Pty Ltd, a company started by the owners of AXIS Financial Group.
Both SuperWiser and AXIS Financial Group provide personal advice under Australian Financial Services License No. 233680, as owned by AXIS Financial Group Pty Ltd.
As a provider of personal advisory services to individuals, we have been operating for almost as long as super has existed. Our interest in developing technology began in 2014 and has progressed to our current capability to present our methods through our unique client portal.