Time to review your superannuation

Given the heavy falls in the share market over the last 18 months or so, most people looking at their superannuation balances would be depressed by the losses shown, but they should be looking past these to make sure they are taking advantage of other opportunities.

Generally speaking, fund members, especially those in the accumulation phase, have not taken enough interest in looking at the right approach for them.

However, the disastrous results that most superannuation fund members have experienced should not trigger a knee-jerk reaction as they are not necessarily in themselves a reason to change.

Fund members should consider whether there is any way that these paper losses could create opportunities for the new financial year.

Younger fund members must always bear in mind that markets have plenty of time to recover these losses before their retirement as well as adding further to their superannuation assets.

At the other end, many retirees could in fact gain some benefits by carefully considering their financial strategy.

Some areas to consider include:

• Contributing more into super
  While it is still uncertain whether we have reached the bottom of the market, we are definitely at a low point, so now is a good time to be considering contributing more into superannuation to take advantage of depressed share prices.
  Note that from 1 July 2009, the concessional contribution limits have halved to 25,000 for the under 50’s and $50,000 for those aged 50 and over. These amounts include super guarantee contributions made on behalf of the person.
  
• Consider taking a pension
  People aged 60 and over who have not previously taken a tax-free pension from their super fund should consider whether now is the time to turn on such a pension. This particularly applies to people who are still working as there are tax advantages in taking a tax-free pension and sacrificing more salary into superannuation. Though the halving of the concessional contribution limits has significantly reduced the amounts that can now be salary sacrificed into superannuation.
  
• Review your investment mix
  People shouldn’t look at their low (or negative) superannuation returns for the last year and based on that alone, decide to change funds or take a more conservative approach by rebalancing into cash or fixed interest.
  For younger fund members in particular, superannuation is still a long-term approach. Even those in retirement and drawing a pension should generally have a long-term outlook.
  Moving into more conservative asset allocations right now is only crystallising losses at a low point in markets.
  The time to have done this has most likely passed and now is probably a good time to be buying growth stocks, while the market is depressed, rather than selling them near the bottom.
  
• Buying life insurance through your super fund
  Buying life insurance through a superannuation fund is very cost-effective because of the tax benefits, rather than purchasing a policy from after-tax dollars.
  Family breadwinners who have a young family and mortgage responsibilities should seriously consider having some form of life cover.

  Joe Kaleb is a chartered accountant, registered tax agent and the CEO of www.australianbiz.com.au. The website provides practical tax and business articles, KPI and finance calculators, templates, business insurance, commercial, factoring, car & equipment finance, and other tools to assist business owners and financial decision makers to better manage their business and income tax obligations. The site is also a useful resource for accountants in servicing their small business clients.