For years superannuation has played a major part in securing the future financial security of millions of Australians, with the compulsory savings scheme viewed by many countries as a grand idea. From July 2006 (and again in 2007) there have been some major changes regarding superannuation, so if you'd like more information about what the new rules are and where you can go for more information, read on.
The 2006 changes: simpler super?
According to the superannuation choice website, since July 2006 “…employees working for corporations who previously could not choose a fund because they were employed under a state award will be able to choose a fund.” In other words, from July 2006 people have been able to choose their own fund – choose a good one and you could benefit you financially; get it wrong and your long-term goals could suffer. Most employees are now covered under a “notional agreement preserving state awards”, part of the Federal workplace relations system. Essentially, the 2006 changes mean you can choose which institution manages your retirement investment. If you do nothing, money will continue to be paid into your existing fund. In many cases this will already be the best value fund, but the legislation change means that you can now shop around for another fund if you choose.
Most people are able to choose their preferred super scheme, which is selected when your employer gives you the standard choice form: they are supposed to do this within 28 days of you beginning a job. You can only ask your employer to change your fund once a year, but once you do they must begin to pay to your chosen fund within two months.
If you have time, as well as good legal and financial advice or knowledge, you can also run a self-managed superannuation fund.
The 2007 changes: super choice?
With the marketing gumf screaming “better super” obviously that is the message the Government wants people to get. Further changes to super rules, effective from July 2007, have changed the way tax is calculated on super payouts and contributions, pushed the working age back to 75 (you can keep contributing to super after 60 till age 75 if you have a part-time job) and allows the self-employed to claim super contributions as a tax deduction. The reported intention of the changes is to improve the “lifestyle options” of retirees, simplify taxation and provide greater incentives to work and save. Certainly the taxation changes have caused a stir among accountants and other financial advisors – should you pump more money into super or continuing investing in other arenas? The jury is still out.
Changing your super strategy
There are a number of things to look out for when comparing schemes. Remember that a super fund is firstly an investment fund and returns vary from fund to fund and company to company. Many people shift funds for lower fees, but then don’t think about other benefits that could cancel out the fee saving. One of these benefits might be insurance of different kinds, fund services (telephone help lines etc). Other big things to consider are your investment options: you might get potentially higher returns from a new fund but have a more volatile investment. Alternatively, you may get greater security but lower expected returns. You need to decide what is more important to you. This will be impacted by your age, level of debt and personality (risk adverse or risk friendly).
You can get further information about super from the National Information Centre on Retirement Investments website, the Australian Taxation Office and the super choices website. A financial planner, accountant and various financial services associations can also offer information or advice if you are looking to change your super strategy to ensure the greatest benefit from the changes.
