6 ways to get active with your super

Around 9.5 million - or 80 per cent - of Australians sit in what's called 'default' super. When they get a job, they go in the automatic 'default' option.¹

"There is a danger in that, because it may or may not suit you," says Westpac Financial Planning Specialist, David Simon. "A lot of people got caught out massively in the GFC just because they didn't take the time to invest in something they're comfortable with."

Get active with your investments

The alternative to being passive is to get active; to become engaged with super. Simon says there are no guarantees with anything, but getting more active with your super means there is a greater prospect of retiring with more money.

The key to getting more active with super is to recognise that you not only have control over what you invest in, but also lots of opportunities.

Simon recommends these six simple ways to get more active with your super:

1. Choose your goals

Get active and set goals. Work out when you want to retire. Is it 60 or 65 or 70? When do you need to access your super money? How much do you need to retire on?

You can then work out the difference between where you are now and where you need to be. You might have to save more, or invest in higher-returning assets.

2. Choose your investment mix

How much you retire with depends largely on your investment mix. One of the most important choices is between 'growth' and 'defensive' assets.

Growth assets, such as Australian shares, are more volatile. But over time they generally return more, so have the potential to boost your super savings. More conservative defensive assets, such as bonds, might help you sleep at night because they don't move around as much. But, compared to growth assets, history has shown that they under perform in the long run.

The key is to get active and choose the investment mix that suits you and your goals.

3. Consider buying direct shares

Do you have an insight on a key stock, like Telstra or a bank? Many superannuation funds now allow you to buy actual shares. You don't have to hold your entire super in managed funds where a professional picks the stocks and enjoy the benefits of having direct control.

4. Diversify

And you're not restricted to just Australian shares. There are a raft of other investment optons such as international share managed funds which could include companies such as Google, Apple and Microsoft. You could also consider a whole range of alternative assets including property, alternatives (including foreign currency and gold), fixed interest and cash. Depending on your superannuation structure you could also hold collectibles such as art work and vintage cars!

5. Get ethical

What if you're concerned about the impact some companies have on the environment? You can make a powerful statement and choose an ethical managed fund that screens out stocks that you think could be harming society and the planet.

6. Contribute

There are generally two methods to invest into superannuation.  One method is before being taxed at your marginal tax rate (otherwise known as a concessional contribution such as salary sacrifice or a compulsory employer contribution) with the other method being after being taxed at your marginal tax rate (otherwise known as a non - concessional contribution such as a personal or member contribution) 

The concessional contributions cap generally includes any contribution for which a tax deduction has been claimed. 

For 2015/16 the standard concessional contributions limit is $30,000. This limit is subject to indexation but may not increase each year. This cap indexed for the first time (since the introduction in 2007) on 1 July 2014. 

A higher limit of $35,000 applies to individuals age 50 on 1 July of the relevant year. This higher limit is not indexed and will be eliminated when the standard rate also reaches the same level. 

The tax rules that apply if concessional contributions exceed the relevant cap changed for contributions made from 1 July 2013. Excess contributions tax no longer applies to these contributions, but instead the excess contributions can be refunded and are taxed at the individual’s marginal tax rate including levies (less the 15% tax already paid). Tax penalties also apply. 

The non-concessional contributions cap generally includes any personal contributions for which a tax deduction has not been claimed or spouse contributions. The Government Co-contribution is not included in the cap. 

Under age 65 a maximum limit of $180,000 per year or $540,000 every three years (known as the ‘3-year bring forward rule’) applies (for 2015/16). Over the age of 65, the 3-year bring forward rule ceases to be available and it is limited to $180,000 of non-concessional contributions a year (where allowable) unless you started a bring-forward period before you reached age 65 and it is still operational. 

Any contributions in excess of the cap (contributed from 1 July 2013) can be elected to be withdrawn from super along with associated earnings. The contribution amount is tax-free but the earnings are added to taxable income with tax payable at marginal tax rates including levies plus penalties. 

If the election to withdraw is not made, the excess contributions are taxed at 45% plus 4% for Medicare and the Temporary Budget Repair Levy.

"The more effort you put into superannuation, the more you study it and engage with it, the more you're likely to have a better outcome," Simon says.

1. Hon Bill Shorten MP, “Stronger Super – Government Response to the Super System Review (Cooper Review)”, issued 16/12/2010, strongersuper.treasury.gov.au.

Source: http://www.bt.com.au/getmoving/5-ways-to-boost-your-super/

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