25 Jul The Do’s & Don’ts of Consolidating Super
Though most Australians tend to ignore superannuation until they get close to retirement, your superannuation is an important part of your financial journey for two main reasons:
- This will provide the bulk of your retirement income when you retire; and
- If you suffer a health issue during your working life, your superannuation usually holds (some) insurance benefit to help you and your family to manage.
Both of these are critical, especially since government provisions for social security payments (disability and age pension) continue to be cut back.
This means that if you choose to take action with your super, either from general information or to take more control, you need to be VERY careful not to mess up the overriding purpose of your account, by either losing money or valuable insurance cover!
It’s a very important decision potentially involving the biggest amount of money you will have in your lifetime so DON’T take short cuts such as:
- Automatically choose to rollover into your account with the highest balance;
- Decide to keep a number of separate accounts because it’s too hard to decide;
- Rollover before checking whether your employer will contribute to the new fund;
- Rollout of a defined benefit fund without advice;
- Rollover from funds with existing insurance cover without understanding what you are losing (see more in the next section!);
- Rollover to the account suggested by your:
- Neighbour, taxi driver or mates at work;
- Media expert’s promotion;
- Cheap advice book;
- Bank manager or branch staff;
- Internet bait link; or
- ‘Find my lost super’ site link provider.
Most or all of these options will result in you having issues or regrets later.
We’ve identified the potholes and how you can avoid them. After you have done some initial research on the funds that you would prefer you will have to weigh up the following:
- Existing and alternative insurance offers;
- Insurance cover you need to protect you and your family;
- Any existing health conditions and when you had these;
- Fees on the accounts;
- Performance of the funds; and
- Ethical considerations.
Why did I lead with the insurance considerations? Because general advice that you will get in relation to considering whether to rollover your superannuation will barely touch on this.
If you lose your insurance cover when you roll out of a fund, it may be impossible to replace or reinstate the cover again and this could be a serious issue should you have suffered a change in medical history or lifestyle. One of the rules an experienced adviser understands is that you NEVER move superannuation without reviewing/replacing the insurance cover first. It’s our first rule – and it should be yours too!
Next month we’ll provide more details but for now keep an eye out for your superannuation statement and start thinking about whether you have what you need or whether you really should be getting professional advice to get the most from your retirement savings.