Sound out your super before changes hit

TIME is running out to prepare for July’s changes, writes Anthony Keane.

TIME to get super organised. A wave of superannuation rule changes come into force in less than one month, and people who fail to plan for them risk missing out on the gains – or worse, losing money.

A key change is the introduction of new financial advice rules that mean “the days of commission-based selling are well and truly gone”, according to Hostplus chief executive David Elia.

However, fund members who do nothing will not benefit, he says, because the upcoming ban on commissions is only for new products, so older products with higher costs can still hurt people’s retirement savings.

“There will be huge opportunities for consumers to significantly reduce the fees that they currently pay,” Elia says.

“Check your fees and make sure you absolutely understand what you are being charged fees for. Given all the changes taking place, many people will have the opportunity to renegotiate lower fees if they are not already in a low-cost super fund.

“Check your statement, understand the nature of any commission-based fees currently deducted, and contact your provider and ask are there any alternatives.”

Another big super change on July 1 is the increase in the concessional contribution cap.

Elia says this could create “an enormous amount of confusion”, and some younger Hostplus members have thought the cap increase was for all ages. “Talk to your financial adviser or superannuation fund and ensure you do qualify, and make sure you are taking advantage of the maximum limits where available,” he says.

Catapult Wealth director Tony Catt says now is the time for everyone to review their salary sacrifice arrangements.

“Make sure you are contributing what you thought you were, and then what you want to have in place on July 1 is in line with the new contribution rules,” he says.

Catt says new higher taxes for high income earners in retirement mean couples can consider evening up their fund balances, either by splitting contributions or one partner withdrawing then recontributing to their spouse’s account.

“It may be that you do nothing, because you will never run into the problem of earning more than $100,000 each because it’s such a big number,” he says.

Catt says self-employed people can use June to secure tax deductions from last-minute contributions, while people taking a tax-free pension from their superannuation need to make sure they take at least the minimum pension they are required to.

“Even if you are $1 short it can get fairly ugly, because you are not deemed to have abided by the rules … and have to pay 15 per cent tax on the earnings,” he says.

Super fund member Lauren Bruce, 25, (pictured) is among those planning to take a closer interest in super.

The nursing student says she has several super funds that she wants to consolidate after working several part-time jobs while studying. “I know I need to do it now and it’s on my to-do list,” she says.

BIG CHANGES ARE COMING…

From July 1 more super will be paid by your boss as the compulsory super contribution rate rises from 9 per cent to 9.25 per cent of wages.
MySuper accounts, which have low fees and simple features, will replace existing default accounts offered by superannuation funds.
The upper age limit for paying super to an employee will be removed, so people aged over 70 will be eligible to receive contributions from their employer.
Concessional contribution caps for over-60s are rising from $25,000 to $35,000, giving older Australians more scope to make tax-deductible contributions to their super fund. This higher cap is to be widened to people aged over 50 from July 2014.
It will be easier to track down lost super and consolidate it using the ATO’s SuperSeeker tool.
Retirees earning more than $100,000 a year income from their super will pay more tax.

By Anthony Keane, News Limited Network, news.com.au