Consolidate your super and save
If I offered you a year's pay for an hour or so of work, you would probably jump at the opportunity.
But many people unwittingly walk away from that opportunity when they maintain multiple super accounts. The end up paying extra fees and insurance premiums that significantly erode balances over time.
In this increasingly mobile economy, it's understandable that so many people have more than one super account. New accounts may have been established as you changed jobs, or you may work more than one job, each with their own super plan.
When it comes to boosting your super, however, one is the friendliest number.
Last year the Australian Productivity Commission estimated that a 21-year old with a full-time starting salary of $50,000 and an average insurance premium of $340 would have $833,000 in her super by age 67 if she has only one account. If she has multiple accounts, her final balance shrinks to $782,000, leaving her with $51,000, or 6% less, to spend in retirement. That's roughly equal to her first year's salary.
It's a common scenario. About one in three member accounts is an unintended multiple, according to the Productivity Commission, and they cost members about $2.6 billion annually.
And it's the compounding effect of these additional premiums and fees that really damage your super balance over time.
In addition to increasing your balance, consolidating your super accounts reduces your paperwork and makes it easier to track your super.
And it only requires a small amount of work.
(Keep in mind that while consolidating makes sense for most of those in defined-contribution plans, it is a more complicated decision for participants in defined-benefit plans. If you are in a defined-benefit plan, consult with an advisor to determine whether reducing accounts is wise.)
Before you consolidate, find out whether your super fund charges exit fees and review how any changes will impact the insurance you may have through super. Also, check whether changing funds will affect how much your employer contributes.
Then, look for a diversified, low-cost fund that matches your risk tolerance and time horizon. It may be a super plan you already participate in, or a new one you find by comparing funds.
Then, let your employer know about your decision. If you are not sure how many super accounts you have, you can find out and continue tracking your super with this tool from the Australian Tax Office.
Written by Robin Bowerman
Head of Corporate Affairs at Vanguard.
25 June 2019
vanguardinvestments.com.au
Latest Newsletters
Hot Issues
- Aged care report goes to the heart of Australia’s tax debate
- Removed super no longer protected from creditors: court
- ATO investigating 16.5k SMSFs over valuation compliance
- The 2025 Financial Year Tax & Super Changes You Need to Know!
- Investment and economic outlook, March 2024
- The compounding benefits from reinvesting dividends
- Three things to consider when switching your super
- Oldest Buildings in the World.
- Illegal access nets $637 million
- Trustee decisions are at their own discretion: expert
- Regular reviews and safekeeping of documents vital: expert
- Latest stats back up research into SMSF longevity and returns: educator
- Investment and economic outlook, February 2024
- Planning financially for a career break
- Could your SMSF do with more diversification?
- Countries producing the most solar power by gigawatt hours
- Labor tweaks stage 3 tax cuts to make room for ‘middle Australia’
- Quarterly reporting regime means communication now paramount: expert
- Plan now to take advantage of 5-year carry forward rule: expert
- Why investors are firmly focused on interest rates
- Super literacy low for cash-strapped
- Four timeless principles for investing success
- Investment and economic outlook, January 2024
- Wheat Production by Country
- Time to start planning for stage 3 tax cuts: technical manager
- Millions of Australians lose by leaving savings in default MySuper funds
- Vanguard economic and market outlook for 2024: A return to sound money
- An investment year of ups and downs
- How to tame the market's skewness
- The Countries that Export the Most Wine in the World
- Tips for preparing for the best tax outcomes
Article archive
- October - December 2023
- July - September 2023
- April - June 2023
- January - March 2023
- October - December 2022
- July - September 2022
- April - June 2022
- January - March 2022
- October - December 2021
- July - September 2021
- April - June 2021
- January - March 2021
- October - December 2020
- July - September 2020
- April - June 2020
- January - March 2020
- October - December 2019
- July - September 2019
- April - June 2019
- January - March 2019
- October - December 2018
- July - September 2018
- April - June 2018
- January - March 2018
- October - December 2017
- July - September 2017
- April - June 2017
- January - March 2017
- October - December 2016
- July - September 2016
- April - June 2016
- January - March 2016
- October - December 2015
- July - September 2015
- April - June 2015