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Thursday, April 12, 2012

“Super” Disturbing

One of my clients recently received a letter from his industry super fund letting him know that they’d found some money in another super account (sometimes referred to as “lost super”).
They were offering to have the amount rolled over to their fund - all he had to do was sign and date a form they’d enclosed, and they’d do the rest.

The letter didn’t mention the amount of money involved, and it made no mention of insurance. And in no place did they suggest that they should speak to their adviser or in some way make sure it was an appropriate move for their circumstances.

Now it just so happened that we were in the process of increasing his insurance cover because of his increased debt levels. The amount that he has in his existing fund is enough to cover his additional needs. What makes this so important is that he actually has a pretty severe back condition. The extra insurance we were looking at was either going to be very expensive or was going to exclude back injuries.

Luckily this client found a statement from the old fund (not everyone would be that organised), and lo and behold what did we find? A fairly large existing insurance component in the old fund!

So essentially, the worst thing in the world he could have done from that perspective would have been to close the old account because it would have cancelled his insurance. As I mentioned earlier, the letter he received from his industry fund didn’t even suggest he should consider any insurance component which is completely irresponsible from an organisation that seriously ought to know better.

Now it was an industry fund in this case, but there have also been a number of retail superannuation managers advertising similar offers.

When deciding to rollover your super some of the very basic issues to consider include (at the very least):

- Fees

- Underlying investment options and exposure to unlisted assets

- Investment performance

- Independent research ratings

- What retirement streams are available and can they be transferred from
   superannuation phase to a retirement income stream without capital gains tax.

- Type of tax structure

- Insurance options

- Death Nominations

- Does the fund allow superannuation splitting – this might become very important if the
   government legislates contribution concessions for balances less than $500,000.

So the message is if you get a letter like the one my client received, don’t just think oh yeah that sounds easy, and sign the form. It may not be in your best interest.

Even if your super isn’t a huge priority for you now, it will be one day, so don’t make bad decisions now that might affect you later.

Talk soon,

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