Many people worry that they aren’t doing enough to support themselves in retirement. A recent nationwide survey by the ABC, known as Australia Talks found that 60% of people think it will be difficult to retire comfortably. As a result, you can feel a little anxious for not doing enough, including taking steps like consolidating your various superannuation accounts.
Don’t that anxiety linger. Having multiple superannuation accounts is very understandable, given that many of us work multiple jobs throughout our careers, with each channelling money into a different default superannuation fund. However, there are some good reasons to consolidate them and the process is actually much simpler than you may think.
Here are 5 things you need to consider when it comes to consolidating your superannuation.
- Why should you consolidate your superannuation?
Firstly, be clear on why you are consolidating. There are two reasons, money and stress. Consolidating your superannuation accounts will ensure you only have to pay one set of fees. It also means you can easily track your balance to see how your fund is fitting in with your overall retirement plans. In addition, you can stop receiving correspondence and marketing from five different super companies throughout the year, many of whom you barely remember signing up with.
- Deciding which fund to consolidate into
Before deciding which single fund to go with, you should research three key areas, rather than automatically pooling all your money into the fund which currently has the largest balance.
Firstly, ensure that your current employer will contribute the same amount to your new fund. It’s possible that your employer may contribute a higher amount to a particular fund. Secondly, check what insurance your various superannuation funds provide (along with funds you’re not currently with). You may have life, disability or income protection insurance that you want to keep. A financial planner can help you understand the insurance implications of consolidating your superannuation funds to make sure you make the right choice.
If you’d like to do some of your own product comparison in the meantime, the ATO has recently released a new tool that allows you to compare MySuper products (MySuper products are basic superannuation accounts without unnecessary features and fees). Check to see if your current superannuation products are MySuper products and if so, you’ll be able to compare them against other MySuper options that may offer you a better deal.
And finally, you may also like to ensure you choose a fund that invests your money ethically and sustainably. We can help to ensure your super investments don’t fund projects that support modern day slavery or damage the environment.
- The consolidation process
Once you’ve decided on which superannuation fund to consolidate into, there are two simple ways to do it.
Firstly, you can contact your chosen fund and ask them to manage the process for you. Or, you can go to the MyGov website, link your MyGov account to the ATO, choose ‘super’, followed by ‘manage’ and then choose ‘transfer super’ to complete the consolidation.
- How much superannuation do you need when you retire?
The amount of superannuation you’ll need depends on when you plan to retire, the lifestyle you intend to lead and of course the wealth you have stored in other assets such as property or cash. As a basic guide, the Australian Government’s MoneySmart website recommends having a lump sum of $640,000 for a couple and $545,000 for a single person to support a comfortable lifestyle in retirement, supported by a partial pension.
Consolidating your superannuation is an important part of maximising your retirement income and we can help you work out the specific amount you need to match your lifestyle and retirement plans.
- Have you consolidated into an ethical fund?
You most likely care about more than just money. You want to ensure that your hard-earned wealth doesn’t fund modern-day slavery or the destruction of critical habitats needed by endangered species. Nor that it funds addiction or climate change. If this is the case, it’s important to consolidate your wealth into a fund that invests ethically.
If you’re approaching ethical investment for the first time, you may be concerned that investing ethically means investing less profitably. Research by Morgan Stanley found that 75% of investors are interested in sustainable investing but 53% believe it involves a financial trade-off. However, the data does not support this. The same research analysed 11,000 funds between 2004 and 2018 and found no meaningful difference in performance. They even found sustainable funds to be more resilient. This is not surprising as consumers are becoming more socially conscious and brands that cause harm to people or the planet are more likely to attract negative press, boycotts and a slow shift away from them. This trend is only set to continue as a new generation of consumers emerges that is more sensitive to social and ecological harms and has the power of social media to amplify their response.
What products could you expect to support if you invest ethically?
A super fund that invests ethically is likely to avoid investing in fossil fuels, weapons, logging, tobacco, gambling and any company that engages in human rights abuses. It’s likely to invest in clean energy, sustainable products, medical products, innovative technologies, education, aged care, recycling and more.
How do I find an ethical fund?
It can be difficult for an individual to judge the ethical quality of different funds, particularly when they don’t fully disclose their assets under management. Fortunately, the Responsible Investment Association of Australia was established to penetrate through this muddy territory and get a clear picture of a fund’s ethical credentials.
They created a certification program to distinguish responsible investment products across Australia and New Zealand. Certified members display the RIAA’s “Certified Responsible Investment” logo once they’ve gone through its rigorous assessment process.
I’m also a board member of the Ethical Advisers Co-op and together we monitor, encourage and hold the industry to account for the available responsible investment products. We also publish ‘Leaf Ratings’ on available funds so check it out!
Novo Wealth specialises in responsible investment. We can ensure you consolidate into a super fund that will invest your wealth into ethical companies that don’t violate human rights or damage the planet. You can also spread your wealth between a mix of RIAA certified and non-certified funds in a balance that you’re comfortable with.
Want to know more?
Speak to me about how responsible/ethical investment can also be included in your thinking when considering which funds to consolidate into and how this fits into your overall financial goals. Whether enough means the freedom to work less or not at all, having a positive impact on something you care about, more family time, or traveling the globe, we’ll help you plan for what matters most.
Please call 08 8363 8810 or email firstname.lastname@example.org to discuss.
IMPORTANT; This information is general in nature only, it does not take into account your individual circumstances. We recommend that you seek professional advice before making any investment decision.
All the best
Paul Garner CFP®
Certified Responsible Investment Financial Adviser