Consolidating your super has many benefits and can help ensure you don’t lose track of your super.
We’re going to cover off on the benefits of consolidating your super, the process and the timeframes involved in consolidating your super; as well the risks and things to consider before combining your super accounts.
What Does Consolidating Your Super Mean?
While making voluntary contributions to superannuation is a great retirement planning strategy, for most Australians, the majority of your super balance will consist of contributions made into your super account by your employer.
Having several superannuation accounts with various providers is a natural consequence of having multiple employers throughout your working life.
Consolidating your super means combining (or merging) all of your superannuation account balances into one single account.
Related article: Retirement Planning Strategies
How To Consolidate Super
Combining your super into one account can be achieved by one of two ways.
1. Consolidate through your super fund
Simply contact the superannuation fund that you would like to consolidate or rollover your other account balances into and provide them with the details of the external accounts that you would like to consolidate. Most super funds will often assist you with this process, as it is in their interest to administer more of your retirement savings.
If you only have one superannuation account, but would like to switch to a different super fund, you should contact the superannuation fund that you wish to transfer to, as they will be more inclined to assist you.
Read more about how to transfer super.
2. Consolidate through MyGov
If you have a MyGov account, you can select the super tab and then manage and then transfer. This option takes you through the process of transferring your super balances between your accounts, so that you can consolidate your super into one account. If you only have one account, the transfer option will not be available to you.
If you do not have a MyGov account, you can create one here. It will be useful and necessary in the future if you anticipate eligibility for any social security benefits, such as the Age Pension or health care cards.
How Long Does It Take To Consolidate Super?
Combining your superannuation accounts can take anywhere from around one week to a month.
There are some things that you can do to help the process run smoothly. For instance, when completing and submitting any rollover or transfer forms, ensure that your current name, address and other personal details that the super fund has on file is up-to-date and consistent with any identification you are required to submit as part of the consolidation process. Super funds love to find ways to delay the transfer of your money out of their fund due to inconsistencies such as this.
On average, you should allow around 2-3 weeks to consolidate your super.
Benefits of Combining Super Accounts
Generally, merging all of your super into one account is better than having multiple accounts.
The benefits of combining your super accounts include:
Having all of your super in one account makes it easier to manage and keep track of. It is unlikely that you will lose your super if it is all held in the one place. Additionally, you will have less paperwork to deal with and can keep track of things like employer contributions, fees and insurances more easily.
2. Lower Fees
Most super funds charge administration and investment fees based on a percentage of your account balance. So, whether you have your super balance in one account or across several, your super feel will be largely the same, because 1% of $30,000 is the same as 1% of 3 x $10,000. However, most super funds also have a fixed administration fee or minimum fee in addition to the asset-based percentage fee. Therefore, consolidating your super can also reduce fees.
3. Focused Investment Strategy
Combining all of your super into one account allows you to have a focused investment strategy working towards meeting your retirement goals. While a focused investment strategy can be achieved by having multiple accounts, it will make it harder to manage and keep on top of.
Before combining super funds, it’s important to understand some of the risks in doing so:
Risks and Disadvantages of Consolidating Super
Before you get all giddy about the prospect of consolidating your super, there are a few things you need to consider.
Your super account may have insurance policies within the account, such as death cover, TPD or income protection. Some of these insurances could have been setup automatically when you opened the account, or you might have applied for the insurances and nominated your super fund as the owner. Either way, transferring your super out and closing down your account will usually result in cancellation of the insurance policies. If there has been any changes to your health, it may be difficult or more expensive to obtain replacement cover. As you get older, it might be difficult to get any new insurance at all, especially over age 60.
So, before rolling over your super, you should consider whether you need the insurance. If you do need insurance cover, you might want to put in place replacement cover before consolidating your super, or leave enough of a balance in the account so that insurance premiums can continue to be funded.
2. Employer Contributions
Your employer is required to make superannuation guarantee (SG) payments into your super account. Therefore, if you are consolidating your super, you should notify your employer of your new super fund account details, so that all contributions are being made into the correct account.
3. Deductible Contributions
When you make a personal concessional (deductible) contribution into super, you need to notify your super fund of your intention to claim a tax deduction for that contribution. Your super fund will then provide you a notice that they have acknowledged this. If you rollover your super prior to receiving the acknowledgement, you may be unable to claim a tax deduction for the contribution.
4. Investment performance
If you are transferring your super into another fund in an attempt to achieve higher returns; be mindful that a fund with good returns this year may not perform as well next year. In fact, it is unlikely one super fund will have the best performing investment returns year after year.
Also, switching super funds to follow the best performing funds can be an expensive exercise. Not only will your balance not be invested and not receiving an investment return during the rollover process, but you could also be incurring transaction costs by transferring in and out of funds.
Should I Consolidate My Super?
Ultimately, having all of your super within one account is ideal and generally recommended, provided you have taken into account the considerations above.
Our financial planning firm, Toro Wealth, specialises solely in helping 50 to 70 year-olds optimise their financial position in the lead up to retirement. If you’re interested in learning more about our service and cost, click here.
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