Ask Paul: Should I change super funds?


Dear Paul,

I am 66 and working about 33 hours a week. I have about $170,000 in superannuation but don't own my own home.

As super is going to be crucial to my financial security to supplement the age pension, I would like to maximise its growth while I am still working. Would you recommend switching to an industry fund to minimise costs

ask paul clitheroe should i change super funds

I am currently salary sacrificing up to the $27,500 cap set by the government.

I don't have a financial adviser, though I am considering engaging an accountant at this crucial time of my working life.

My current portfolio was changed to lower risk/more cash reserves a few years ago. I would appreciate your assistance. - Deb

This is great. This month I have quite a few questions showing terrific financial literacy, which fills me with hope for people's financial future. Yours, Deb, is a very succinct summary of your situation and a logical strategy.

Basically, you have nailed it. You do need to keep building super, and putting in the maximum allowable by way of salary sacrifice is a great plan.

The amount you have will leave you under the assets test for your age pension ($543,750 for a single non-homeowner). As a non-homeowner, you will also get some rent assistance when you start your pension

Each year you choose to work will obviously see a big improvement in your super and, of course, your salary means you don't need to draw on your super. This is a personal decision, but if you are enjoying your work, each extra year worked will greatly add to your retirement savings.

Taking lower risk in your super investment mix is fine; this is also pretty personal.

I am hoping that your super will turn into a flow of income to supplement your pension for many years to come, so it could be argued it is a long-term investment and a balanced-type approach may suit you. But this is for you and your fund to discuss.

Industry funds do a good job, but there are also many financial institutions running low-cost, high-returning funds. What I think matters is that you are in a low-fee fund and its returns are competitive. This is pretty easy to check out yourself.

I can only give general information in a column like this, so I always encourage people to seek advice if it is needed. An accountant may be one source of advice, but I'd also check if your super fund offers advice to members.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.
John van den Berg
May 29, 2024 4.55pm

You have to be careful with the maximum top-up you can reach per year, especially if your company pays for some insurance into Super: it is added to the total. If you go above the total, you finish up with an ATO fine.

Geoff Mostyn
May 30, 2024 10.23am

Some years ago a financial advisor suggested my wife, then in her early seventies, change her super investments into a "safe, conservative high cash position" . This was following some rocky events on the stock exchange. She resisted the advice which would have involved selling off a lot of bank shares and instead pursued a her moderate growth and income strategy and today is vastly better off and we enjoy a healthy (fortunately) and well funded lifestyle.

I sometimes think that financial advisors do not take into account the longevity of people these days. At 66 years you have many more years ahead of you and feel that a more growth oriented super strategy should still be pursued. At least look at better super fund options and consider moving from a highly conservative low growth cash position to maybe a moderate or balanced growth investment option.