INVESTING

Why now is the time to top up your superannuation fund

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When it comes to super, a few basic housekeeping rules can put you on the right track. In the lead up to June 30, you might want to use the time to maximise your contributions, review your insurance and tackle the more mundane stuff that is easily overlooked.

All of this assumes you have online access to your account. If you don't, register ASAP. Without this access, you cannot keep your account in good order, make changes or monitor your fund's performance.

Super accumulates over the 40 or so years of your working life so establishing good habits early pays off, as does making extra contributions that compound over time.

"You should be maximising concessional contributions where you can if you've got the capacity to do so," says Colin Lewis, head of technical services, at Fitzpatricks Private Wealth.

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"Employees can now claim their own personal contribution and claim a tax deduction."

Previously employees had to rely on salary sacrifice to contribute before-tax dollars but they can now do so directly. But be careful you don't exceed the $25,000 concessional cap.

"If you got $10,000 from your employer you can contribute up to $15,000 before June 30," says Lewis.

"That's the beauty of personal contributions. In the past, June would've been too late to arrange salary sacrifice. Now you can put a contribution in and claim a deduction."

The other thing that is important to note, he says, is that if you have less than $500,000 in your account - which covers a lot of people - you can carry forward the unused portion of your concessional contributions to next year.

Lewis says the other avenue to top up super is an after-tax contribution - up to $100,000 a year.

"That is dictated by how much you've got in super. If you've got more than $1.6 million you cannot make an after-tax contribution," he notes.

However, a couple can maximise their super as a family unit.

"You might have $1.7 million in super and your spouse $800,000. When the time comes to move into retirement phase, you could cash out the amount over the $1.6 million and transfer it to your spouse."

Check also whether your fund and your insurance are suitable. "Are you in the right fund to start with? That's important. Also, you don't want to be duplicating fees with multiple accounts but you also don't want to give up valuable insurance cover."

This might mean keeping an unloved fund going for its life cover with enough in the account to cover the premiums.

"Make sure you know where your insurance is held and make sure you have the right amount of cover," says Lewis.

Once the mortgage and other debts are paid off and the kids have left home you may no longer need it.

"As you get older, premiums go through the roof and your contributions are not going towards your retirement savings, instead they're being eaten up by the insurance."

Review your death benefit nominations and remember that if you have a binding nomination it needs to be renewed every three years. A binding nomination advises the fund's trustee who should receive your benefits.

Otherwise, the trustee has the discretion to direct it to somebody else, or to your estate. Under super law, benefits can only go to a "dependant", generally your spouse and children. Young members often make the mistake of nominating their parents, which is invalid.

Lewis points out that a binding nomination has a downside.

"It gives you certainty but if your circumstances change - you have another partner, haven't got divorced and you haven't updated your nomination
- the trustees will pay your ex instead.

"It's only when you've got complex arrangements that involve children from former marriages that you may want to put in place binding nominations. But you need to make sure you update them," he says.

Finally, does your fund still meet your needs?

"So many people have self-managed funds and don't need them," says Lewis.

"If all you are invested in is term deposits, shares and managed funds, you have to ask why you've got one. Why go to the hassle and expense?" All these direct investments are now available in mainstream funds."

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Vita Palestrant was the editor of the Money section of The Sydney Morning Herald and The Age. She has worked on major metropolitan newspapers here and overseas and has won several prestigious journalism awards including the 2001 Citigroup Award for Excellence in Journalism, Personal Finance Category.
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