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Consolidating your super accounts takes five minutes but could save you thousands




MERGING your superannuation accounts takes five minutes, but it could end up saving you thousands of dollars in fees.

If youve moved jobs several times over the years, theres a good chance you have more than one superannuation account, each set up by different employers.

According to figures released by the Australian Taxation Office last year, 45 per cent of working Australians have more than one superannuation account.

With most people paying around $532 a year in fees and charges per super account every year, the amount of money you stand to lose over the course of your working life is significant.

It is not uncommon for people to open a new super account when they start a new job instead of taking their super fund with them when they change jobs, ATO Assistant Commissioner of Superannuation John Shepherd said last year.

People might also have super accounts which they have lost track of, for example, they may not have updated their contact details with their funds when they moved house there are still $5.8 billion worth of accounts in this category.

Since the introduction of the myGov website, which allows people to see all of their superannuation accounts in one place and merge them with the click of a button, the ATO has seen a rapid increase in the number of accounts being merged.

In the past, workers were required to fill out forms and provide certified documents to super funds to reclaim their money.

In the six months to December 2014, more than 265,000 accounts with balances totalling $1.13 billion were consolidated. That was a rise of 400 per cent from the previous year, when 52,000 accounts worth more than $270 million were consolidated.

Before consolidating, ASICs MoneySmart site advises workers to consider whether there are any termination fees, what level of insurance your chosen fund offers, and to make sure your employer can contribute to your chosen fund.

When consolidating your super, dont just choose the fund with the highest balance, MoneySmart advises. The best fund for you may be one of your small accounts, or a completely new fund.

HOW TO CONSOLIDATE YOUR SUPER

1. Create a myGov account

2. Link the ATO to your account

3. Go to the Super tab

4. Combine your accounts

Source: ATO

Extra cash should it go into super or paying off your mortgage




WHETHER it’s a work bonus, a tax refund or maybe a win on the horses, if you want to make some extra cash last and grow there’s always the home loan or your super.

There are many different variables to consider when working out which is best, but in most cases your age will be critical to working out which option will leave you in better financial shape.

For younger generations, when comparing a 25 year-old to a 35-year old you get greater bang for your buck if you inject additional funds into super rather than your home loan, says Mortgage Choice spokeswoman Jessica Darnbrough.

Calculations for both examples were used on the premise the person takes out a $300,000 home loan at the age of 25 with interest at four per cent and also has a balanced super fund account that pays on average six per cent annually.

It found the 25-year-old would be $45,000 better of by tipping an additional $50 a week into their super rather than their home loan.

For the 35-year-old it found they would be $26,000 better off come retirement if they chose to inject an additional $50 a week into their super rather than their home loan.

But Darnbrough says the older a person gets, the more likely they are to benefit from paying off their mortgage before injecting money into their super.

AMP financial planner Andrew Heaven says it all depends on an individuals circumstances.

Be mindful of your tax benefits, think of where you are at in your life,’ he says.

The guiding principles around your mortgage is the debt removal and free cashflow and the guiding principle of super is make hay while the sun shines, make the most of the tax principles and put money away to fund long-term benefit.

If you leave saving for your retirement until the last minute its going to constrain you at the other end.

He also says the benefits of putting extra money into super is it will be invested for the long term so you will make gains from compounding interest.

For those in their 40s and 50s, Heaven says pre-planning in your 30s to smash down debt will give you extra cashflow if you have children that require education and cost more to look after as they grow up.

But he says once you hit the 50s and your children have hopefully finished their education the focus should be pouring more cash into your retirement savings.