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22/07/2020

Responsible Superannuation Management During COVID-19

With the advent of the COVID-19 pandemic in March, this year, in Australia, financial security has come into question for many Australians as they have taken pay cuts, lost shifts at work or worse. The situation has prompted the Government to offer those in financial distress the opportunity to withdraw from savings previously put aside for retirement – their superannuation. While some individuals have been dependent on their super to survive, others have been spending frivolously on things like shopping sprees, luxury items and plastic surgery. The current circumstances beg the question: what should I do when I have early access to my super?

It’s always worth asking if you’re getting the best value for money from your superannuation provider. In this piece, we focus on what to look out for and what to avoid when managing your superannuation account. We provide general financial advice looking at getting the best value from your super and explain what a self-managed super fund is to help you make informed decisions. Continue reading for more insights into the best superannuation investment decisions during the COVID-19 pandemic.

To Withdraw or Not to Withdraw

The answer is complex. Not one single financial situation is the same, so the option that is best for your circumstances will depend on you. We don’t advise anybody to go into huge amounts of debt or poor living circumstances when there is superannuation available to pay for life’s essentials. The basics of food, clothing and shelter remain the fundamental necessities. If your experiencing genuine financial hardship which impacts the most basic of human needs, the answer is obvious. On the otherhand, if you’re looking at this as some ‘free money’ so you can buy a new 80” HD TV to help you get through the current climate created by the Covid-19 pandemic, we encourage you to think again.

This is ultimately money you’re taking from the ‘future you’. Depending on your age, a $10,000 drawdown now, could easily equate to a reduction of more than double that figure in missed growth.

If you are in any doubt about whether or not your current situation warrants dipping into your super, please speak with your financial adviser first.

Getting the Best Superannuation Value

Many people are unaware of the fees and charges associated with their super account. Many people also don’t realise that they have several investment options available to grow their super savings. By making sure you’re receiving the best value for money in terms of fees and the best return on investment from your superannuation portfolio, you potentially set yourself up to receive up to an additional five figure sum when you eventually cash out and retire. It’s worth asking your superannuation account manager about your fees, risk profile and investment options when you’re considering what to do.

Check out performance benchmarks online – they will give you an indication about which is the best performing super fund. By comparing the rate of return of your super versus another provider you gain information that can help you to make a decision to optimise your super, either internally or at another provider. It’s estimated that one in three Australians are paying too many fees on their superannuation. When comparing super benchmarks or rankings online, make sure you compare investments with similar levels of risk and similar features to ensure the fees described are relevant to your situation.

Self-Managed Super Funds Explained

A Self-Managed Super Fund (SMSF) is an increasingly popular option that offers Australians an opportunity to take more control of their superannuation. Self-managed super funds are the preference of people who engage with their super fund more than on average and who are currently invested in retirement planning. They give investors more balanced investment options to choose from to grow their savings and more hedging options to protect against risk. They also give investors the chance to invest in direct property which can offer attractive returns when compared to some property funds. Some people like to take a ‘hands-on’ approach and manage the entire process themselves, whilst others prefer to let an expert manage the fund for them, albeit with their input.

Self-managed superannuation funds offer several tax benefits, they allow flexibility with concessional and non-concessional contributions as well as the ability to include several beneficiaries . They enjoy lower tax rates than regular income, and direct property held in an SMSF fund generally attracts no Capital Gains Tax if sold in retirement phase.

SMSFs may offer greater flexibility in the purchase of insurance than regular industry super funds do too. If you’re curious about making more money on your superannuation investment, ask your financial adviser how to set up an SMSF and about the rules and benefits or drop us a line to find out more.

If retirement is on your mind or you’re simply interested in collecting the most from your superannuation investment, contact the financial advisers at Pillar Financial today to discuss your options.