Time for a superannuation check-up

The new financial year has begun, and with it have come some important changes to superannuation from 1 July 2024. With these changes coming into effect, it’s a good time to give your super a check-up. Your super could be one of the biggest assets you ever have – getting into the habit of checking in regularly with your super can help you stay on top of it and make better choices for your future.

On 1 July 2024, the superannuation guarantee rate increased from 11% to 11.5%. Employer super contributions are calculated on a worker’s ordinary time earnings, for payments of salary and wages. For employers, the maximum super contribution base increased from $65,070 to $62,270 (the limit on what you can earn each quarter before your employer can stop making super guarantee contributions). The concessional super contributions cap also increased from $27,500 to $30,000 and the non-concessional contributions cap increased from $110,000 to $120,000. 

The ATO suggests the following steps as a good place to start in giving your super a check-up:

• Check your contact details: Make sure your contact details and tax file number (TFN) are up to date with the ATO and your super fund.
• Check your super balance and employer contributions: Checking your super balance and keeping track of your employer contributions can be done at any time through ATO online services or your super fund. Your employer should be paying your super at least every three months (though they may choose to pay more frequently). 
• Check for lost and unclaimed super: If you’ve changed your name, address or your job, you may have lost track of some of your super. Lost super is where your super fund hasn’t been able to contact you, or your account is inactive. Unclaimed super is where your fund has transferred lost super to the ATO. You can check this by logging into ATO online services through myGov (although new super accounts may take some time to appear on myGov).
• Check if you have multiple super accounts and consider consolidating: If you’ve ever moved jobs, you might have more than one super account. Each account will charge fees and may include insurance, so combining your super accounts may reduce fees, help you pay only for the insurance you need and make your super easier to manage. 
• Check your nominated beneficiary: Make sure you have a valid death beneficiary nomination with your super fund, as this isn’t covered by your will. Check with your fund if there is an expiry on the nomination – some funds have options where the nominations do not expire, while most nominations expire every three years. If you don’t have a beneficiary nominated, your fund won’t know who you wanted to your benefits to go to and will follow the law in determining where your super should go. 

You should also take a careful look at how your fund is performing and check that you aren’t paying too much in fees. You might also think about evaluating how your super is being invested – does it match your stage in life, how much risk you are willing to bear, or even your ethics and values? If you have insurance cover with your super fund, regularly check that it still meets your needs.

Do you have enough super?

Determining whether you have enough superannuation for retirement is a complex and highly individual question. It’s much like asking how much money you need for a weekend getaway: everyone has different aspirations and preferences. While it’s challenging to provide a one-size-fits-all answer, these tips will help you assess your superannuation needs.

The Association of Superannuation Funds of Australia (ASFA) has developed a “retirement standard” which provides a broad approximation of how much super you need in retirement. As of March 2024, as combined amounts for couples retiring at age 67, ASFA suggests:

• $690,000 for a comfortable retirement (providing an income of $72,663 per year); and
• $100,000 for a modest retirement (providing an income of $47,387 per year).

These figures assume that you will draw down all your super, receive a part Age Pension, own your home outright and are in good health. While useful as a baseline, your personal needs may differ significantly.

So this gives you a starting point – but perhaps you want to spend more than $97 a week eating lunch and dinner out as a couple, or more than $1,816 a year on international travel. How do you get a more tailored estimate?

Online calculators: tailoring your estimate 

For a more personalised estimate, try using online tools such as the MoneySmart.gov.au Superannuation Calculator, which provides projections based on your age, desired retirement age, and expected fund performance. Additionally, the MoneySmart Budget Planner can help you understand your current spending habits to make it easier to project future needs. Remember your super income is tax free after age 60 – so you may not need as much income from super to fund a similar lifestyle. 

Many super funds also offer detailed calculators and forecasting tools with additional features. Since July 2022, super funds have been strongly encouraged through both legislation and regulatory pressure to provide more assistance to members in formulating a retirement income strategy. So there are new free retirement calculator and forecasting tools being developed all the time. However, these tools rely on many underlying assumptions that may not perfectly match your circumstances. 

Age Pension: a safety net, not a solution

Many people assume that they will just fall back on the Age Pension if there is not enough in their super. This is definitely a safety net; however, you may not be comfortable on the restrictive budget required to get by on the Age Pension. As at 1 July 2024 Age Pension for a couple is $43,752 per year.

Seeking professional advice: the most accurate approach

For the most accurate assessment of your superannuation needs, it is best to seek professional advice. Your adviser can consider factors such as your health and life expectancy, inflation and investment returns, wages growth and taxation, and fees and regular contributions. Professional advisers have access to sophisticated tools and can provide customised forecasts based on your unique situation.

Conclusion

Determining if you have enough super requires careful consideration of your personal circumstances and future goals. While general guidelines and online tools can provide a starting point, seeking professional advice is the best way to ensure you’re on track for a comfortable retirement.

Source: ATO - Keeping track of your super 
ASFA Retirement Standard