Tips for managing your super in the pension phase

It can be daunting moving from super's accumulation phase to pension phase. Instead of money going into your account, it's going out. With this in mind, it's important to check whether your existing fund still serves you well.

For starters, you have different needs in the pension phase. You will want easy and reliable access to your money, especially in an emergency. So even if your fund's returns and fees are OK, how responsive is it? And does it have the investment options to put your strategies in place?

"Look for a fund with a trusted brand because you want them to be around for a long time," says Alex Dunnin, executive director of research at Rainmaker SelectingSuper.

"You also want a fund that is easy to transact with. Is your pension payment transferred into your bank account? Do you have to set up a cash management account? Can you do an ATM withdrawal and how does that work?"

Once you move to pension phase you are dealing with a "serious amount of money", he says, and you need to be cautious.

"Even if you haven't been earning that much money through your working life, by the time you retire it will have accumulated into a sizeable amount, $300,000 or $400,000 or $500,000-plus. It means you've got to start thinking differently."

Apart from talking to your own and other funds, he recommends a visit to Centrelink.

"They have financial services officers who are there to help you take advantage of the age pension. They will tell you what you are entitled to and how you might need to juggle things to maximise what you are entitled to."

Kirby Rappell, research manager at SuperRatings, says that although investment options are the same in accumulation and pension phase, retirees have different objectives and risk tolerance and need strategies to complement them.

"We are seeing more providers offer 'bucket' solutions," he says.

"They might allocate money for short-term requirements to go into a cash account, a medium-term allocation going into a less volatile capital stable or conservative balanced option and, if there is a third bucket, it's invested more aggressively to provide capital growth for the later years in retirement."

It may come as a shock to realise that two-thirds of all fees you will ever pay as a super member through your lifetime will be paid after you've retired.

"That's when you have the maximum amount of money and it means even a 1% fee, which sounds low, is a lot of money," says Dunnin. "A 1% fee can amount to $3000, $4000 or $5000 a year. If you're going to be paying 2% or 3%, which is what some retirement products used to charge, it's $10,000 or $15,000. Fees should go up a little bit but not by much."

Rappell says super funds are able to offer advice over the phone to help you understand the process and provide basic advice. For a full in-depth plan, an adviser may charge a couple of thousand dollars but you should "research your adviser to ensure they are independent and well qualified", he says.

Dunnin says you should watch out for contributions fees when switching.

"You shouldn't be paying an entry fee or, if you are, it's got to be because you are getting fantastic financial advice because you've got a very complicated financial position that involves setting up estate planning deals and family trusts. If you just want to join a retirement product, it's pretty basic and there shouldn't be a contribution fee."

Rappell says best practice is for a pension withdrawal to be like an online savings account withdrawal, where you can access the money in your account the next day so long as it meets the [institution's] daily cut-off.

Tax-free times

You can access your super tax free once you turn 60 and meet a condition of release - that is, give up your job - or start a transition-to-retirement. The fund's earnings are also tax free.

Once you turn 65 you can access your super tax free either as a lump sum or pension without having to give up work. Fund earnings are also tax free.

Go to ASIC's MoneySmart website to calculate how long your super will last and what you will get from the age pension to supplement your income.

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