Investor InsightsSuper Stategies > More than one super account? You're likely losing money

More than one super account? You're likely losing money

June 2019

Consolidating your super will likely increase your savings in the long-term, writes Alan Hartstein.

More than $17.5 billion of Australians’ money is currently unaccounted for, lost, or otherwise sitting in dormant accounts, according to the Australian Securities and Investments Commission’s MoneySmart website. A large amount of this is held in superannuation funds, and some of it could be yours.

For many people, accumulated super savings will not only be their major source of income in retirement, but possibly their only income, so it’s vital you get your super in order as early as possible to maximise that investment. It might feel distant now, but when you’re in your 60s and retirement is right before you, that money will be very real.

Consolidating your multiple and often long-forgotten super accounts into one has a range of benefits. Not only does it help you to more easily keep track of your investments but it will, in most cases, save you a large amount of money over the long period of time you accumulate superannuation savings.

Millennials are especially disengaged from super

A large portion of Millennials in particular seem disengaged with the subject of super and the whole concept of consolidating accounts, according to a March 2017 report by The Association of Superannuation Funds of Australia.

By failing to consolidate multiple super accounts, these young people especially risk eroding their balances unnecessarily by paying multiple fees and charges.

The report found:

  • young Australians tend to have more money in their super accounts than in the bank, yet 40 per cent have no idea what their super balance is and a further 16 per cent only have a vague idea
  • more than 30 per cent of those aged 18 to 25 have more than one super account and 10 per cent have three or more accounts; for those aged 26 to 30, nearly 20 per cent have three or more accounts
  • more than 60 per cent of young Australians have multiple super accounts because they haven’t consolidated them, while 30 per cent said they had trouble finding old accounts
  • $1000 invested today by a Millennial will deliver $4000 or more in today’s dollars at retirement.

Your consolidation guide

  1. The easiest place to start is to check where your dormant super accounts are. You can do this via the MyGov website. Once you sign-in and link your account to the Australian Taxation Office, you should be able to see all of your funds in one place.
  2. Compare each of your funds. Mark Robinson, financial adviser at RetireInvest in Castle Hill/Hornsby recommends focusing on funds that:
    • offer flexible and fixed insurance that does not expire if you don’t contribute
    • have a good range of investment options, factoring in risk and diversification
    • suit your desire to take a low cost or more active investing route.

    “Gather together your various statements as they come in over July and August and either take them to an adviser to sort through, or make a basic spreadsheet listing what each fund is worth, how the money is currently invested, how fees are charged, and what active insurance lies within each,” suggests Robinson.

    “Only then will you begin to feel in control and able to accurately gauge the potential benefits of consolidation, and make a decision as to whether it is something you can do yourself or need help with.”
     
  3. Once you’ve completed an initial search, you should speak with your financial adviser about the pros and cons of consolidating your accounts. Your adviser is well placed to help identify the appropriate product for your needs and can alert you to any risks or costs associated with consolidating any accounts.
  4. Make sure you organise for your employer to pay your super into your consolidated account. That way you’re not just creating another account you may lose track of in the future.

Ready to consolidate?

First, Robinson says to consider that people often overlook insurance in their superannuation and lose it when they switch to one account. You’ll want to make sure you have the insurance you want in the super fund you consolidate into.

There’s two other considerations. Those drawing a pension from their super may find cash flow flexibility across different market conditions in having one fund investing in defensive assets and another in growth assets. Also, “consolidating a tax-free fund with a taxable fund can lead to a loss of flexibility in estate planning in retirement” warns Robinson.

But for most of us, the advantages of one super account are clear.

To discuss whether you should consolidate your super, contact your financial adviser.

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Before re-directing your super or moving your money into your product, you will need to consider whether there are any adverse consequences for you, including loss of benefits (e.g. insurance cover), investment options and performance, functionality, increase in investment risks and where your future employer contributions will be paid. Any investment is subject to investment risk, including possible repayment delays and loss of income and principal invested. Returns can go up and down. Past performance is not indicative of future performance.

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