Are you interested in your superannuation?

Mention the word “superannuation” and many people begin to yawn.  Which is a shame, because a small degree of active interest in your superannuation fund now can potentially make tens of thousands of dollars difference to your retirement nest egg down the track.  

Tens of thousands of dollars. And it’s crazy not to make the effort, because the money has to sit there anyway.

As an example, for a 25 year-old on an average income, a 1% reduction in fees on their super fund could potentially mean an extra $50,000 in today’s dollars at retirement. That’s a damn nice world tour, just for the effort of choosing a lower-cost super fund. 

Or another example – that same 25 year-old on average income could potentially increase their nest egg by more than $140,000 in today’s dollars by choosing a fund that provides an extra 2% per annum return. Surely that extra return is worth just a little bit effort on your part, in choosing a fund that suits you?

The problem with superannuation (I have decided, based on my decade of experience as a financial planner, not to mention the hundreds of discussions I have had with readers of my blogs and columns) is twofold. Firstly: legislative change. Since superannuation became compulsory in 1992, the government has made over two thousand changes to the legislation. Changes to the amount you can put in, the amount you can take out, the degree to which it is taxed, not to mention the age at which you can access your superannuation. There has been no long-term consistency to the way that superannuation has been regulated and hence many people have no real confidence that they will be able to access the money, down the track, when they need it.

Secondly: financial literacy. While many Aussies are quite financially savvy, there is still a reasonable proportion who simply don’t understand how superannuation works. Which isn’t surprising, given the aforementioned legislative change! Personally I believe that, since our money is compulsorily taken from us and placed into a superannuation fund until we reach retirement age, there should also be a level of compulsory education provided by said superannuation funds.

Still, that’s a hobby horse for another day!

In the absence of compulsory education, there are some fantastic resources out there for workers to get a bit of a head start. The government’s MoneySmart website has some great general information on superannuation. They also run some excellent retirement planning calculators, to show you in dollar terms the reward of lower fees/higher returns.  The Association of Superannuation Funds Australia (ASFA) also runs the Super guru website for consumers which has some useful information. And then, of course, there’s my latest book Money for Nothing!

The sad fact is that only 20% of investors take an active interest in where their superannuation is invested. Sad – because of the potential difference that that interest could make. And the only cost to you in taking that interest? Well, maybe an hour or two of your time, every year or so. Surely that’s not too large a price to pay?

I’d love to know your thoughts though. DO you take an interest in your superannuation? If not, what is holding you back?