As a new school year begins with all the associated pressures and responsibilities, now may be a good opportunity to set aside a little time for number one, to check how your super is set up. I have outlined a few areas for you to consider, but the points below do not constitute personal advice (as we don’t know your personal circumstances). It’s product information only for you to consider.
Salary sacrifice
Pre-tax super contributions attract a 15% tax which may be lower than your current marginal tax rate. The cap for salary sacrifice is currently $25,000 per financial year and this amount includes your employer contribution. So for example, if your employer is contributing $13,000 there is still an opportunity for you to contribute another $12,000 at a 15% tax rate. NGS Member On-Line provides an account of your salary sacrifice and employer contributions so if you are hoping to maximise this benefit, it may be prudent to check the contributions around early April. You can then either pull back or top up your contributions to hit the $25,000 mark.
Binding Death Nomination
A valid binding death nomination gives you the peace of mind of knowing that the trustee of your superfund is legally obliged to pay your benefit to your nominated beneficiaries or your estate. A valid binding Death nomination removes any discretion the Trustee may have in distributing your super. NGS Super now offers a three-year binding Death nomination which must be renewed or a perpetual binding Death nomination.
Investment Choice
The vast majority of NGS Super members remain with the Diversified MySuper Option which is a growth option featuring approximately 70% growth investments and 30% defensive investments. However, there is a range of other options which you may wish to consider. Before selecting an investment mix you may wish to consider your objectives, your risk tolerance, and how long you plan to remain in the workforce (investment time horizon). Limited advice from your super fund can also be useful before making an investment switch. Defensive assets include cash and term deposits, government bonds, social impact bonds, corporate bonds, property income and bond alternatives. Growth assets usually contain a mix of Australian shares, international shares, property, infrastructure and growth alternatives. The Fund offers these investments in mixed options such as Moderate Growth, Shares
Plus or Balanced as well as sector-specific options such as Australian
shares, property or international shares. You can download the NGS Super Investment guide for more detailed information.
Insurance
Have you checked your most recent member statement or NGS Super member on-line for your levels of death/total and permanent disability and income protection insurance? NGS Super provides default cover for eligible members, but it is up to you to ensure that the default level is suitable to you. For example, if you are earning more than $80,000 per annum and have not topped-up your IP cover, the top part of your salary (over $80,000) will not be covered for income protection. As an illustration, a teacher on an annual salary of $102,000 would have a maximum default cover for a salary of up to $80,00 and so could be eligible to claim a maximum IP benefit of only $72,000 per annum (90% pf $80,000, not 90% of $102,000). See “Your Cover in Practice” in the NGS Insurance Guide for more information. The opposite could occur where a member working full time moves to part time reducing salary by 50%. This member may be over insured as the Fund is unaware of employment statuses. It is up to this member to reduce the cover if necessary by advising the Fund and filling in the form. Likewise, Death cover decreases with age, so you may wish to check that your Death cover is adequate. Financial planners usually recommend enough cover to pay off the mortgage as a minimum. You can apply for extra units of Death, TPD or IP and acceptance by the insurer is based on the medical evidence provided. It is not automatic.
Is your super adequate?
Talk to a financial planner to help you track your super or use the calculator on the NGS Super website. It’s a simple way to find out how much super you will have at retirement and you can change the contribution rates to see how that affects the final balance!
Our best wishes for a successful, fulfilling and exciting 2020!