Superannuation Myths

Superannuation is still undoubtedly the best vehicle to save for your retirement.  As I have written in previous newsletters, superannuation has both tax and Centrelink benefits which can add greatly to the wealth of clients.

When speaking with clients there are 2 main objections to using superannuation as a savings vehicle.  The first objection is that superannuation is always losing money.  What is not clear to many people is that superannuation is only a tax structure.  Superannuation does not dictate that you must have shares or property.  Therefore provided the superannuation investment strategy allows for it, 100% of your superannuation money could be invested in cash or fixed interest based investments.  Therefore it is possible that your superannuation is no more risky then money in the bank.  It is a myth that superannuation is risky as it purely comes down to the member’s investment choice.

The second main objection to superannuation is that the Government is always changing the rules and making it less attractive.  While it is true that the rules around superannuation have always and will always change, the tax effectiveness of money, once it’s inside superannuation is as great as it has ever been.  There have been measures taken to reduce the amount of money that people can contribute to superannuation, however a superannuation tax rate of 0% on pension investment earnings and 0% tax on pension payments for superannuation members over the age of 60 is still as good as you can get. In fact recent announcements by the government in relation to capital gains tax when a member passes away have increased the tax effectiveness of superannuation.

The main advice I have for clients is to be aware of the rules of superannuation and how they affect their own personal circumstances.  Do not make blanket assumptions that superannuation can’t be of benefit to you.