Top super tips


Although falling share markets have put superannuation savings back in the spotlight, there are also other important super issues to consider.

1. Will your super last?
With people living longer than ever before, one of the greatest challenges relating to superannuation is longevity risk. According to the Australian Bureau of Statistics, the proportion of people aged over 85 years is expected to triple over the next 40 years. This means that you need to be prepared to fund at least 20 years of retirement, and importantly, in a way that you can still live comfortably. It is essential to consider the cost of health care in your retirement planning and this should include medical treatment, modifications to your home, any in-home services and aged care accommodation.

Thatís why it is critical to keep regularly reviewing your superannuation strategy to make sure that your retirement savings are going to last and are structured in the most tax effective way. You want to ensure that you have the opportunity to maximise any social security entitlements and that you are aware of any new changes in legislation which could affect your situation.

It is also important to remember that super is not an actual investment, it is a savings vehicle to hold your investments. Depending on the type and size of your fund, your super money can generally be invested in a range of different types of investments. You will generally have the ability to choose these investments to suit your attitude to risk and comfort level with various investment types. The super vehicle however, ensures that your investments are taxed in a more concessional way.


2. Have you made a binding nomination?
If your super fund allows you to make binding nominations, then it is important to check that you have completed the appropriate paperwork, itís up to date and still reflects your wishes. Along with your Will, this is a critical component in your estate planning. A binding death nomination ensures that your superannuation is distributed according to your wishes. It allows you to choose your beneficiaries instead of leaving it up to the trustee to direct the funds at its discretion. Without a binding nomination, there is a small risk that the trustee makes a decision that gets over turned at a later date. It is not uncommon for complications to happen in blended family situations.

You can nominate any of your dependants like your current spouse, de facto or a child of any age, or another person who is financially dependent on you at the time of your death. If you havenít made either a binding or non-binding nomination, then the fund trustee will generally have discretion as to who they will pay your death benefit to. This is why itís important to have an up-to-date Will, which includes your superannuation savings.


3. Should you have insurance inside your super?
There are a number of advantages of funding your insurance policy premiums through your superannuation fund. For example, any ttaxable contributions made to your fund that are used to pay premiums do not attract the contributions tax (of up to 15%). However, you should remember that your long-term savings may be eroded over time if your super is not regularly toped up to make up for the cost of the premiums.

You should also be aware of a few issues if you hold Total and Permanent Disability (TPD) insurance cover inside your super. A permanent incapacity condition of release must be satisfied before any funds are released. This means that there is a risk that you wonít be able to gain access to your funds immediately in the event that you suffer a permanent disability. In addition, there are tax consequences involved when a non-tax dependent beneficiary receives life insurance proceeds from a super fund.


What you need to know


The advice in this article is general advice only and does not take into account your objectives, financial situation or needs. Therefore, before acting on the advice, you should consider its appropriateness to your personal circumstances. Although the information in this article was obtained from sources considered to be reliable, the information is not guaranteed to be accurate or complete. This publication was prepared by AMP Financial Planning Pty Limited ABN 89 051208327. The information in this article is current as at 19 2009 and may change over time.