Pretending your super – or future – doesn’t exist

A 2021 Families in Australia Survey found that one in five families were worried about their future financial situation#. Understanding where you are at and having a plan to achieve your financial goals can be a real relief. 

TelstraSuper Financial Adviser, Jeremy Lack says that the simple act of reaching out to a financial adviser and finding out your options can be extremely liberating.

“Many clients – particularly clients worried about retirement – don’t fully understand how super and the Age Pension work together and may think they’re going to be worse off than they actually will be,” says Mr Lack. “Getting help shows them the true picture and what steps to take next.”

Changing investment options on a whim

Market volatility can spook even the most confident of investors, but instead of switching your investment option during times of market volatility, you may be best-off sticking to your long-term strategy. This is because switching investment options during times of volatility can crystalise your losses – that is, lock them in. 

For example, research from Griffith University found that “bad” switches grew significantly from 33.5 per cent to around 50 per cent during the pandemic. This may suggest that half of members who switched during the crisis period would have been better off doing nothing*. 

“While online switching might be quick and easy, it can also be costly,” says Mr Lack. “This is because when the markets bounce back, those who had switched options may miss out on the gains.”

While we don’t have a crystal ball to predict the future, if interest rates and inflation continue to rise, it’s looking likely that we’ll see market volatility around for some time yet. In fact, volatility will always be a part of financial markets, and often when you least expect it.  

Nominating a friend or parent as beneficiary of your super if you die

A beneficiary is someone you nominate to receive your super (and any proceeds from life insurance held within super) after you die. This is important because under Australian law super does not automatically make up part of your Estate if you pass away. 

There are strict laws that mean super can only be paid to people who are your dependants or to your legal personal representative at the time of your death. So, if you want to benefit someone outside these criteria with some or all of your superannuation – like a friend for example – you’ll need to nominate the legal personal representative of your estate and then outline your wishes in your Will.  

“A dependant is usually a spouse or de facto spouse, children or a person who lives with you and depends on you financially,” says Mr Lack. “If you’ve got your heart set on someone else, or would like to make a bequest to a charitable organisation, then you’ll need to make the arrangements outside of super.”

Moving to a conservative investment option too early

“There’s a misconception that as you get older you must move into a very conservative investment option, when in reality your super is likely to be invested for many years to come – even in retirement – giving you time to ride out markets,” says Mr Lack. 

While Mr Lack says that you shouldn’t be in an investment option that keeps you up worrying at night, understanding your risk profile and investment time horizon is vital to understanding what may be right for you.

“Many super funds can help you with this over the phone or with tools on their website, if in doubt call your fund” he says.

Simply picking a “cheap” option

Cheapest doesn’t always mean best. When you’re looking at super funds you need to consider the fees in relation to the investment returns. This is called the net benefit and it looks at the growth your super is providing in returns once the fees and costs are taken out.

“High fees can be fine if the returns are equally high,” says Mr Lack, “the net benefit figure is going to give you the most accurate picture of how your fund is (or isn’t) delivering for you.”

For example, according to the Net Benefit modelling by SuperRatings, if you’d joined TelstraSuper 10 years ago with $100,000 invested in the Growth option and a starting salary of $80,000, you’d be approximately $16,000 better off than the median super fund and approximately $35,000 better off than a median retail fund. For the Balanced option you’d be approximately $15,000 better off than the median super fund^ and approximately $39,000 better off than a median retail fund^. 

Advice options for members

TelstraSuper members can get general and simple personal financial advice about their TelstraSuper accounts over the phone at no additional cost – it’s all part of the membership. This covers topics such as basic contribution strategies, picking an investment option, or understanding if your insurance coverage is adequate. 

To speak with a Financial Adviser like Jeremy about more comprehensive personal advice, you can make an appointment with TelstraSuper Financial Planning. They have a range of advice options available for a competitive fee and the first appointment is obligation free.

To get started, simply give us a call on 1300 033 166 or request a call back.

Learn more

# Families in Australia Survey: November 2021
*Griffith University, The wrong end of the switch: exposing the switching behaviours of members under duress during a financial crisis
^Net Benefit modelling performed for TelstraSuper by SuperRatings as at 30/06/2022. Investment returns are not guaranteed. You can read all the applicable assumptions here.