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As you kick your fresh financial strategy into gear this year, it is important to be aware that updates have been made to superannuation that may affect you. Included in this financial year’s federal budget were some important superannuation changes and measures for consumers of which to be aware.
Your Superannuation Fund Is An Open Book
Administrators of superannuation funds are now expected to give out more information regarding investment choices and how that may impact the interests of super fund members. It is now a requirement for trustees to provide Important information about how finances are managed within the fund.
Pressure To Perform
Included in the list of new measures to ensure super funds remain accountable, is a yearly performance test for each fund, created to ensure super fund trustees are managing and spending finances within the fund, according to the best interests of the consumer. The performance test will begin July this year and results will be available for viewing online. Superannuation funds that fail twice in a row will be prohibited from taking on new members. You will now also be able to take a look at where your superannuation ranks in a long list of products online, based on investment performance and fees and you will be reminded and assisted at the same time to consolidate your super funds if necessary.
There is No Need To Leave Your Superannuation Behind
In a bid to avoid the case of many super accounts for an individual, employees will now retain their existing superannuation fund when they change a place of employment. This in turn will allow individuals’ super balance to grow as it will all be in the same place. This will take place this year on July 1.
At this point in time, although most Australian employees have their choice of which super fund they would like to invest their retirement money, most will default into the fund that is chosen by the company they work for. If an employee would like to stick with their existing fund when changing jobs, they are required to complete a form to inform their employer. This seems to deter many and as a result, employees can soon begin to collect a variety of super funds from past employment history, with a need to roll it all into one.
From July 1 however it will be up to the employer to find out from the Australian Taxation Office whether or not a new employee has a current super fund. Unless the employee says otherwise, the employer will begin to make payments to that previously nominated fund. The employee does have the option to tell their new employer what their chosen fund is through the Standard Choice Form. If there is no previous existing account and the new employee does not tell the employer what fund they have chosen, the employer can then nominate a default account to open for their superannuation to be paid into.
Employees being able to automatically keep their existing fund may get rid of the mess and duplicated fees and encourage better retirement savings for many Australians. It is important however to speak to your advisor to ensure you are in a well performing super fund that you will be happy to stick with for the long run, otherwise there won’t be much benefit if you stuck in an underperforming fund.
Get Ready For A Super Increase
Although the Federal Government have not made a formal commitment, an increase is scheduled on July 1, taking superannuation contributions from 9.5% to 10%. This is called a Super Guarantee, and it tells employers how much they need to contribute to their employees’ retirement savings, taken as a percentage from their wage. This increase means more retirement savings for employees and is a big change, not having increased since 2014.
The fact remains that it is the consumer’s responsibility to ensure they are in a super fund that suits their needs best and to remain aware of key information and changes as they happen. Your financial advisor will help you to remain in the know about your super fund as it relates to your financial objectives and to develop and update your financial strategy to ensure you are on the right track to obtaining financial freedom.
Call 02 4038 1623 and make an appointment with Elliot Watson Financial Planning today to discuss your superannuation.
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