So you have just started work and your employer has given you a lot of forms. They seem like they are written in another language for all the sense they make to you.
They start talking about superannuation; you have no idea as you haven’t had an account in the past. They end up setting you up a fund so they at least have somewhere to put your funds.
Now you have been working for 5 years with your employer contributions of 9.5% of your annual salary going into this fund. That adds up to a lot of money so what’s it all mean?
When you haven’t got a super fund your Employer will set you up automatically with their default fund. In a default fund your investment options are chosen for you, generally the default investment option. There are a lot of defaults. This option is generally a balanced approach which suits most people who are accumulating assets for retirement. It has some cash, shares and property. Not overly aggressive but also not too conservative as you need your money to grow when you are accumulating assets!
A default super fund will also have insurance attached, life, total & permanent disablement cover and sometimes even income protection cover. These are usually small amounts as they are automatically attached to your fund upon set up so your loved ones are covered if anything happened to you. The premiums for these covers are funded from your super account balance, so they are not free. This is a very cash flow efficient way of obtaining insurance as super funds are generally offered group discounts which they pass onto the customer.
These type of funds are not complicated, they are designed to receive money and grow over time. You are unable to make a lot of choices and it isn’t flexible to hold assets you specifically choose. They are a low cost and efficient for your super when you have small account balances.
Remember though the choices you make when you are young will have a big impact on the end result as compound interest is a very powerful tool.
If you wish to obtain advice on your super or have any questions regarding this please give the staff at Ritchie Advice a call we would be more than happy to help.
This advice may not be suitable to you because it contains general advice which does not take into consideration any of your personal circumstances. All strategies and information provided in this article is general advice only.
Ritchie Advice Pty Ltd ABN 12 150 128 448, is a Corporate Authorised Representative 408050 of Dover Financial Advisers Pty Ltd, Australian Financial Services Licensee No. 307248.