A recent Australian study indicates taking an ‘advised’ approach to financial planning, of which super can be a significant part, delivers outcomes that are on average 5.2% better [1].
Whether you are early in your career or if retirement is just a few years away, and you haven’t given more than a cursory thought to your super, may I suggest you review it as a priority.
But before we explore why you could be better off, let’s first recap the fundamentals of super.
Employer Super Guarantee
Up from 9.5% last year, your employer is now obligated to contribute 10% to your superannuation fund of choice. This is the first increase of a series of 0.5% annual increases until 2025-26 when it will reach 12%.
Stapled Super
The ‘stapling’ provision was also introduced in 2021, allowing a fund to follow an employee as their career evolves. It aims to overcome the issue of multiple default superannuation accounts so balances may be consolidated to make the most of investment return potential while eliminating unnecessary fund administration costs.
Annual Contribution Caps
Also from July 1, 2021 the annual concessional (before tax) contribution cap became $27,500 (up from $25,000).
If you have salary sacrificing arrangements in place, it’s important to check the increased Super Guarantee contribution plus your own super top-up salary sacrifice amount remains under the annual cap each year.
There have also been changes to non-concessional (after tax) contributions which now allow annual contributions up to $110,000. Increased by $10,000 from previous years, this enables surplus cash to be placed in super. However, before you do, it’s important to be sure you won’t need that money for other purposes as you won’t be able to retrieve it until retirement age.
The three-year bring forward rule has also increased to $330,000 (up from $300,000).
This rule is particularly helpful for those who have sold an asset or enjoyed a financial windfall such as an inheritance.
Each of these non-concessional contribution provisions apply to superannuation balances that are equal to, or less than, $1.7 million (also up this year from $1.6 million).
Catch Up Contributions
As the name suggests, this relatively new provision allows those with super balances less than $500,000 (prior to June 30) to contribute previously unused contribution cap amounts to their super account.
Catch up concessional contributions can be helpful for people who may have had an interrupted income year, perhaps due to parental leave or caused by the pandemic. This provision allows unused cap amounts to be carried forward five years.
Why super?
What’s not to love about super? It’s a regular savings plan supported by your employer in a savings and investment environment with a low flat tax rate.
However, when it comes to the future of your super, you have options.
You can take a set and forget or ‘non-advised’ approach and fingers-crossed you’ll enjoy a nice surprise when you eventually retire or you can take an ‘advised’ approach and make the most of your super investment growth and tax saving opportunities.
In a 2021 an Australian study [1] quantified the value of advice and identified those who opted for an ‘advised’ financial planning approach (which includes superannuation) were on average, 5.2% better off. If you think about the potential value of superannuation over 40 years of your working life, potentially that can make a significant difference.
You can read more about the study here.
Next steps
As you would expect, I strongly recommend an ‘advised’ management approach that considers the raft of financial matters that can affect your super and retirement plan.
I understand time is an issue, so may I assure you our ‘advised’ approach will do the heavy lifting for you. Your next step should be to take this 5-minute financial health check.
Obligation free, this confidential, self-assessing questionnaire will help you to quickly understand where you are financially, and the areas in which you may need extra support. May I also extend an invitation to talk through your responses.
For more information or to discuss your financial health check, please contact Executive Strategies on +61 7 3007 2080 or email contact@executivestrategies.com.au
Executive Strategies is a specialised information hub for executives and senior managers who may have founded their own business or who work for growing private, ASX listed companies or government businesses. Its purpose is to provide access to specialist advisers and information that addresses the often-complex issues affecting their personal prosperity.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decision.
Please note: Tax advice and other services not offered under the Fortnum Private Wealth AFSL are referred to appropriately qualified professionals.
[2] 2021 Value of an Adviser Report – Russell Investments
https://russellinvestments.com/au/financial-advisers/your-business/business-solutions/value-of-an-adviser
