Tips for reviewing annual super statements

When it comes to retirement, many of us may receive retirement income from various sources. For example, investments (inside and outside super) and social security entitlements, such as the Age Pension.

Importantly, if we desire to have a retirement lifestyle greater than what can be provided by sole reliance on the Age Pension and the benefits of Super Guarantee contributions—then a proactive approach to retirement planning is worth considering.

 

With this in mind, it’s important to note and understand that super is a powerful tax-effective investment vehicle that can help us with accumulating wealth in our working life to support our lifestyle in retirement.

On this point, the Government’s recently released Retirement Income Review (final report)*, highlighted that our super—and subsequent retirement income (and retirement outcome)—can be boosted by:

  • increasing our super contributions
  • achieving better after-fee returns on our super assets
  • more effectively drawing on our super assets.

 

Annual super statement

In light of the above, as a super fund member, you will soon be receiving your annual super statement. While this statement can be complex, it’s vital to engage with it—to stay informed, and make changes if applicable.

Research^ suggests that the disengaged and ill-informed often:

  • don’t make voluntary super contributions
  • have multiple unconsolidated super accounts
  • don’t know their super account balance nor the amount needed to retire.

Therefore, the below information can help you understand and assess several key areas covered in the statement.

Asset allocation
Review your existing asset allocation (and underlying investments): the proportion of your super money invested in each different type of asset class (and sub-asset class).

By reviewing this, you can assess if you are appropriately investing your super money, in line with your investment risk profile. For context, your investment risk profile is often based on the following:

  1. your financial situation, goals and objectives
  2. your desire to align your investment values with your personal values
  3. your expected investment performance, time horizon, and tolerance/capacity for risk
  4. your understanding of investment fundamentals (eg risk/return, asset classes, and diversification).

Investment performance
Review the past performance of your investments: the performance of the investment options selected and your specific rate of return (the weighted rate of return for all investment options selected) over a given period.

By reviewing this, you can assess your investments’ performance relative to other investments and super funds.

Please note: The ATO’s ‘YourSuper comparison tool’ may assist here, however, it’s important to make like-for-like comparisons, and understand that past performance shouldn’t be used as a measure for future performance.

Super contributions
Review your past super contributions history: this can include concessional (eg employer contributions including salary sacrifice, and personal deductible contributions) and non-concessional contributions.

By reviewing this, alongside other things (eg account balance, asset allocation, investment performance, and fees), you can assess your progression in terms of the accumulation of wealth for retirement. You can also assess your use of relevant contribution types and limits, and your employer’s payment of Super Guarantee contributions.

Super beneficiary nomination
Review your existing beneficiary nomination: your beneficiary nomination details outline whom you have nominated to receive your super benefits upon your passing, and the nomination type you have used.

By reviewing this, you can assess whether whom you have nominated (and the nomination type used, eg binding or non-binding death benefit nominations) is up to date, valid and reflects your wishes.

Please note: If you haven’t made a beneficiary nomination, then upon your passing, your super fund trustee can use their discretion when paying your super benefits—this is also the case with non-binding nominations.

Personal insurances
Review your existing personal insurances: in most instances, you will find that you are able to hold personal insurances inside super, such as life, total and permanent disability and income protection insurance.

Please note: Trauma insurance policies created from 1 July 2014 must be held outside super.

By reviewing this, you can assess whether the cover (and features), and the insurance premiums payable for this cover, are appropriate, based on your personal circumstances (needs analysis).

Fees
Review your existing fees: several fees may be payable with super. For example, member fees, admin fees, investment management fees, contribution fees, adviser service fees, and insurance premiums.

In broad terms, the lower the fees payable, the lower the impact on your ability to accumulate wealth.

By reviewing this, you can assess if the fees payable are proportionate to the features and benefits, investment and insurance options, and advice services you receive—and the impact on your account balance.