Each year your superannuation statement is one of the most important bits of paper you’ll receive. Here’s our jargon-free guide to help you read your super statement to ensure your fund is delivering what you need.
The average Australian is among the richest in the world. Why? Because of the value of their home and their superannuation.
Most people would have a rough idea of the value of their home, but do you really know what your superannuation is worth and whether your fund is delivering the best value for you?
It all starts with that annual superannuation statement you receive. It is one of the most important bits of paper you’ll receive all year. While finance nerds like us run through their statements every year with a fine-toothed comb, we reckon that’s not the case for most people. Many of you probably never read your superannuation statement, preferring to file it away the moment you receive it. Don’t make that mistake.
If unit values, premiums and preservation status send your brain into a tailspin, here’s my jargon-free guide to help you decode your super statement.
1. The snapshot
One of the first things you’ll see when you read your superannuation statement is a snapshot of your account.
Your account balance will be shown at the start of the statement period, usually 1 July on the previous year.
You’ll then see a record of all the contributions and withdrawals you’ve made over the year. Then you’ll see the total value of fees, insurance premiums and taxes you’ve paid. And finally your total investment earnings.
It’s always worth double checking your employer contributions to ensure you’re getting paid the right amount. If not, follow up with the boss or HR.
At the end of this, simple maths will give you your closing balance (hopefully much higher than where you started). While this is a handy reference, it’s light on detail, which means you need to read past this summary page.
2. Preservation status
Super is classified either as preserved, meaning you can’t touch it, or non-preserved, meaning you can (another classification, ‘restricted non-preserved’, may also apply to contributions made before 30 June 1999).
Your super will be preserved until you meet a condition of release such as reaching your retirement (or preservation) age, or in a small range of special circumstances. One of the recent special circumstances was COVID-19 early release of super.
This section provides important details on how your money is invested.
Remember, most super funds offer a number of different options that range from low to high risk, so make sure you’re comfortable with where your money is invested.
They also vary significantly in cost. Generally you’ll find the fees for more complex, riskier investments will be higher to justify the higher expected returns.
In a confusing twist, you’ll also see a ‘unit value’ and ‘unit price’ next to the balance of your investments.
That’s because super funds pool your money together with other investors before they invest it in the market. This pool of money is divided up into units, which you’re allocated based on how much money you have invested.
Superannuation comparison websites such as the ATO’s YourSuper look at performance and fee levels between funds and offer a good benchmark.
More on this: 6 strategies that can supercharge your super
High fees can have a huge impact on how well your fund performs over the long-term, so this is another section that demands close attention when you read your superannuation statement.
For some reason, most funds will hide this information after a long list of the transactions on your account. It’s almost like they have something to hide.
All funds will charge some combination of an administration fee and an investment management fee (sometimes called an ICR or MER). You may also be paying a fee to an adviser, as well as legacy fees like a contribution fee.
At this stage it makes sense to compare what you’re paying against other funds in the market (it’s a good idea to calculate the total fees you pay as a percentage of your balance).
Remember, when it comes to fees, the lower the better.
Most super funds provide some level of insurance for their members automatically, known as default cover. This is generally any combination of life, disability and income protection insurance.
It’s important to review this cover on your statement.
Check the total benefits available to you and review the premiums you’re paying to make sure it’s appropriate for your situation. You can elect to increase your premiums to increase your cover, but bear in mind that your premiums come directly out of your super. It might be more cost effective to seek better insurance elsewhere.
6. Beneficiary nomination
If you don’t make a beneficiary nomination, your super fund will decide how your account is distributed in the event of your death. So ensure you nominate where you’d like it to go.
And finally, remember to review your personal details to make sure your fund has up to date contact details on file.
That way you won’t end up ‘losing’ a super fund down the track.