In 2010, the Australian Bureau of Statistics released a report showing that 76% of Australians are NOT on track for a comfortable retirement.
Therefore the default future for by far the majority of Australians is an uncomfortable one. One where rather than having enough money to travel or be generous to the kids and grand kids or simply being able to enjoy life - most of us will be stressed and have to worry about money and not be able to be generous etc.
Therefore the default future for by far the majority of Australians is an uncomfortable one. One where rather than having enough money to travel or be generous to the kids and grand kids or simply being able to enjoy life - most of us will be stressed and have to worry about money and not be able to be generous etc.
Whats the reason?
There's actually many and I could go on all day about it but one of the simplest ones - one that we can actually do something about - is to consider where our super is invested and actually make an informed decision.
With super, apples ain't apples. Like most things in life, you really get what you pay for.
There's a massive campaign running at the moment on TV and Radio which is funded by the 'Industry Super Network' or ISN. This network most probably includes your super fund... REST, HOST PLUS, HESTA, CBUS, Australian Super, and the list goes on. These are the 'default' superannuation funds which we get automatically put into when we start a job.
But it's your right to choose.
Statistics show that you're probably in one... so are they any good? Remembering this is actually going to be the majority of your future wealth...
1. Firstly, they are run by the union movement and are supposedly run "only to benefit members". That sounds really great. But is it true? If you've been watching the TV or listening to the radio over the past 6-12 months you couldn't have missed an industry super advertisement. In fact last year alone the industry super network spent over $200 million on advertising to sell their products. As a member of that super fund... Did you benefit from that advertising? Your hard earned superannuation paid for it? Well you must of because they're run only to benefit members.
2. Secondly, the industry super funds are not-for-profit. That sounds nice too. Now the main use of the fees they collect from your balance goes into administration (and advertising). That's fine but who does the administration? We'll interestingly enough the ISN funds outsource this to a company called Industry Funds Services Pty Ltd - which is actually a for-profit company - which makes millions of dollars in profit each year. Who owns this company? It is actually largely owned by a trust called Industry Funds Services - Staff Equity Trust, or IFS-SET Pty, the beneficiaries of which are the union bosses who own the industry super funds. So yes technically your super fund probably is not-for-profit. Enough on that point.
3. Thirdly, your default fund is cheap cheap cheap! But is that the most important thing? What about the calibre of investment management? Or the transparency of where your money is actually going and the safety of the underlying investments?
China's latest car maker Chery has recently hit the market and they are selling a small car for $10,900 drive away. Are you thinking of getting one? Or does a major decision like buying a car have other important factors than price alone like safety, or features? ANCAP the safety ratings board have warned consumers that the Chery J1 was the least safest consumer vehicle on the road apart from a couple of commercial vans.
3. Thirdly, your default fund is cheap cheap cheap! But is that the most important thing? What about the calibre of investment management? Or the transparency of where your money is actually going and the safety of the underlying investments?
China's latest car maker Chery has recently hit the market and they are selling a small car for $10,900 drive away. Are you thinking of getting one? Or does a major decision like buying a car have other important factors than price alone like safety, or features? ANCAP the safety ratings board have warned consumers that the Chery J1 was the least safest consumer vehicle on the road apart from a couple of commercial vans.
I know most people, considering that the decision of which car to buy will directly impact on their safety, won't buy one of these cars. It's an important decision and the stakes are too high.
You also find these vast product differences in the world of superannuation. And how important a decision is 'which superannuation fund do I want to grow my financial future?' Is cost the only consideration and cheapest the only option?
For a young person, probably the biggest consideration with superannuation is the calibre of the insurance capabilities available. The ISN network funds have very limited and frankly poor insurance options. Their investment transparency and calibre is very low. And yet the difference in price between a great fund and an ISN fund might be less than half a percent if that.
In Summary
When considering your financial future, the superannuation fund you are in can have a major impact on your retirement outcome. It can also provide you with options to protect you and your family between now and then.
If you're willing to have a look around for a good mobile phone deal, wouldn't it be worth having a look for a good deal on your superannuation fund. Or funds? If you've got more than one you're wasting your money!!!
Or is it that superannuation is for retirement and retirement is too far ways to worry about? Out of sight is out of mind! From experience working with many older clients - finding out at 60 or 65 that you could have done better than a default retirement - when it's too late to do anything about it - can be a real disappointment and actually a bit embarrassing for a spouse.
Take control of your financial future and get some advice from a good financial adviser. Make sure they don't take commissions from investments though. And make sure they're a CFP.
The first appointment with Clarity FP won't cost you a cent. Not making an appointment with someone could cost much more.
