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You can still fine tune your super when things are tight

Financial Planning  |  2/08/2017  |   3 min read

If you’re on a lower income or have more pressing financial priorities right now, the just-completed research released by supermarket giant, Coles, will come as no surprise to you.

Using a combination of data from the Australian Bureau of Statistics (ABS) and its own stores, Coles reported that people on lower incomes are switching from fresh meat and vegetables to cheaper pre-packaged foods.

Feeding the trend are well-publicised issues like housing affordability, student loan repayments and rising energy costs.

It’s therefore unsurprising, that suggesting fund members drop some spare cash into super often falls on deaf ears, particularly among younger members. It was the 30-39 age group that displayed the greatest angst about their confidence in their finances in the Equip 2017 Annual Member Survey.

But all is not lost when it comes to getting more out of your super. One of the easiest things you can do is ensure the mandatory contributions your employer makes to your super is invested in the right option for your goals and life stage.

If you don’t make an investment choice, your super is invested in the Equip MySuper option. This option is allocate 60% to growth investments, like shares and property, and 40% to more conservative assets like fixed interest.

The thing with default options of this type is they strike a balance of what Equip calculates is best for the membership overall, which means that other options may offer better solutions for you.

Taking a look at our investment returns page is a good starting point to seeing the difference choosing the investment option for you can make over the long term. As you do so, there is another important element that should also influence your investment decision:

Your age – how long you have to invest

If you look only at the past three years to 30 June 2017, the Growth Plus option looks a bit of a ‘no brainer’, outperforming the other options by a substantial margin. But look at the 10-year returns. The humble Conservative option has outperformed the more aggressively invested Growth Plus. Why is this?

Remember the Global Financial Crisis (GFC)? Share markets plunged in 2008-09 and options fully invested in shares, like Growth Plus, were hit the hardest. The 10-year returns still capture the effect of that.

Obviously, the graph shows that in the years since, the options with more growth investments in them have recovered and if you are in the early stage of career with many investment years ahead of you, your savings would have recovered.

However, if you were a few years off retirement in the years leading up to the GFC, you would have been better off in the Conservative option, where the GFC had much less impact and would have better protected your lifelong savings.

Generally, the more growth-oriented options have more investment risk and how much you can bear will depend on how long you have until retirement and how well you can sleep at night if financial markets do take a hit.

How we can help

You might not be aware that Equip offers a Member Adviser service. This is not a full financial planning service, but can help you work through decisions around investments, contributions and insurance.

There is small $75 fee for this advice, but you can instruct us to deduct it from your super account. Of all the investment decisions you might make, spending this $75 to get yourself on the right road is probably one of the smartest you could make.

How long will your super last? Check the MyFuture calculator