Superannuation - Set But Don't Forget

The sole purpose of superannuation in Australia is to be a fund that is maintained for the purpose of providing benefits to its members upon their retirement (or attainment of a certain age) or for beneficiaries if a member dies.

Statistics show that at the end of the September 2017 quarter there were $2.5 trillion in assets held in superannuation in Australia. That was an increase by 8.7% in total superannuation assets from the previous 12 months. [1]

The type of funds vary from corporate funds, industry funds, public-sector funds, retail funds and self managed superannuation funds. Retail funds alone hold $591 billion in assets with over 13 million accounts. [2]

Having regard to the amount held in superannuation across the nation it is no surprise that for many superannuation forms a significant proportion of their personal wealth. Superannuation therefore needs to be an important part of any discussion regarding retirement and estate planning.

Unfortunately due to the nature of superannuation and its sole purpose being for retirement or benefiting our family members on our deaths, many tend to adopt a set and forget strategy.

There are significant asset protection and taxation minimisation strategies that can and should be adopted for each individual with superannuation. Particular strategies around dealing with the payment of your superannuation on your death is critical to ensuring your benefits are provided to those you intend and in a manner that is most beneficial.

Just some of the issues to be considered are:

1. What are the rules of your particular fund and does the fund suit your strategy
2. What is your exit strategy
3. Who is eligible to receive your super
4. Will your death benefit be paid tax free or will it be taxed
5. Should your superannuation be paid to your estate or quarantined from your estate
6. Can and/or should your superannuation be paid as a pension or a lump sum
7. For self-managed funds what strategies are in place to deal with both the incapacity and/or of members and trustees  i.e., control of the fund

Once a strategy has been determined it then needs to be documented. Sadly it is this stage which often lets people down. ASIC recently issued a warning in relation to advisors failing to properly complete binding death benefit nomination forms.

Decisions regarding your superannuation should only be made after obtaining expert advice from qualified professionals. Your accountant, financial planner and your lawyer are all critical to providing a holistic approach. Each will have a role to play. Our estate planning team can provide specialist advice on these issues and can ensure your strategy is properly documented.

[1] Association of Superannuation Funds of Australia Ltd – superannuation statistics report 2017

[2] ibid