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By paying some attention to your super now, it can help to ensure you have the funds necessary to maintain your lifestyle in retirement.

Some ways to consider when looking into your super include:

  • how to make additional voluntary contributions
  • where your super fund invests your money
  • telling your fund where you want them to invest your super, and
  • the benefits of combining your super into one account.

You might also like to get yourself up to speed on the changes to super that took effect from 1 July 2021, as well as how super funds can invest your money.

Know your super contribution caps

There are limits to how much you can contribute to your super before you start paying extra tax. These are known as contribution caps.

There are two types of super contributions: concessional (contributions made into your super fund before tax, such as salary sacrificing) and non-concessional (contributions made after tax). If you want to make extra voluntary contributions, keep in mind that anything contributed by your employer under the government-mandated super guarantee scheme also falls under concessional contributions.

The annual concessional contribution cap is $27,5002, while the annual non-concessional contribution cap is $110,0003. However, you may be able to make larger concessional contributions if you haven’t used up all of your concessional cap in previous years. This is known as the bring-forward (or carry forward) rule.

Learn where your super fund invests your money

Super funds typically have a team of experts working to manage investments for members. They’ll often focus on longer-term strategies to meet the investment objectives of the fund. This could mean investing in infrastructure projects such as airports and toll roads or companies in promising fields such as renewable energy and medical research.

Broadly speaking, super funds invest some of your funds in growth assets, including shares and property. These are likely to experience greater fluctuations in value but also have the potential to generate higher returns which help for the long term.

Then there are defensive assets such as term deposits and fixed interest investments, including government and corporate bonds. These can be relatively inexpensive and provide more modest returns with lower levels of risk.

Super funds can either invest in specific classes or they might diversify. Generally, an approach of diversification to spread risk is better. That way, your portfolio doesn’t hinge on a specific asset class which might make it vulnerable to events such as a property market collapse or a rise in interest rates that devalues your bond holdings.

It’s a good idea to understand where your fund is investing your money to ensure it aligns with your values and goals.

Choose the investments your super fund makes

With an understanding of the basic investment approaches of super funds, you can examine the investment options available within your fund. Most will give you a default investor profile, such as a balanced portfolio, but you can usually choose which profile (or multiple profiles) you’d like to use. If you don’t know your current investor profile, it’s worth checking your annual statement.

Here are the four different investor profiles you’ll likely see in your fund.

Balanced

A balanced investment portfolio aims for reasonable growth of your super over the medium to long term. There’s a bit of risk, but not too much. It usually involves investment of about 70% in growth assets and the remaining 30% in defensive assets. It’s worth noting that most super funds will offer this as the default option for its members if you don’t select a profile when you join.

Growth

A growth portfolio aims for higher average investment returns over the long term. It invests in assets that are expected to outperform the overall market. However, it can involve higher risk as it could also mean taking on greater losses when the market is underperforming. The mix will typically consist of around 80-85% growth assets, such as shares and property, and the remaining 15-20% defensive assets, such as fixed interest and cash-based investments.

Conservative

The opposite of the growth portfolio, a conservative approach involves investing about 70% of your super in defensive assets to reduce the risk of investment loss. You’ll have less chance of suffering a bad year, but you’ll also need to be willing to accept lower returns.

Cash

As the name suggests, a cash investment approach means investing in deposits with Australian banks. As cash is a defensive asset, a 100% cash approach will generate stable returns but may not provide long-term growth. As a result, it is seen as the least risky of all asset classes.

Check for lost super as ‘super stapling’ rule takes effect

Finally, on 1 November, the Federal Government put in force the concept of ‘super stapling’. This is where your chosen super fund will stay with you as you switch jobs or careers.

Under ‘super stapling’, you’ll no longer have the problem of having a new default fund opened in your name every time you change jobs. This eliminates duplicated fees across multiple accounts which can erode your balance.

The new rule is a good reminder to check whether you have super in multiple accounts and to consider consolidating them all into one. If you’re not sure where all your super is currently stored, log into your myGov account to check for lost super.

New year, new super strategy

By following through on these four things, you’ll set yourself up for super growth in 2022. But before making any important decisions regarding your super, we always recommend you speak with your financial adviser first. They can help you understand any potential risks as you work to achieve your retirement goals.

1Australian Bureau of Statistics, Australian National Accounts: National Income, Expenditure and Product, June 2021, released 1 September 2021.
 
2Australian Taxation Office, Concessional contributions cap, accessed 26 November 2021.
 
3Australian Taxation Office, Non-concessional contributions cap, accessed 26 November 2021.

What you need to know

Any advice on this website is provided by Resolution Life Australasia Limited ABN 84 079 300 379, AFSL No. 233671 (Resolution Life), and is general advice and does not take into account your objectives, financial situation or needs. Before acting on this advice, you should consider the appropriateness of the advice having regard to your objectives, financial situation and needs, as well as the relevant product disclosure statement and/or policy document, available from Resolution Life at resolutionlife.com.au or by calling 133 731, before making a decision on whether to acquire, or continue to hold, the product. 

The Target Market Determinations (TMDs) for our financial products (where applicable) can be found at Target Market Determinations (TMDs). The TMDs describe the key features and attributes of an applicable product that affect whether it is likely to be consistent with the objectives, financial situation and needs of consumers in the target market.

While every effort has been made to ensure the accuracy of the information, it is not guaranteed. Resolution Life do not actively monitor breach of superannuation contribution caps. You should keep track of the contributions made to your account in respect of the caps applicable to you. You should obtain professional advice before acting on the information contained in this communication. Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information. Resolution Life is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.

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