Making the most of superannuation benefits

For many Australians, superannuation benefits are all about retirement. The more we contribute to our nest egg through our employer, our own contributions, or a combination of both, the better the retirement.

But there is more to superannuation benefits than the lump sum you receive at retirement age, as well as important steps you should take to ensure you and your beneficiaries receive those entitlements.

While it might not seem important now, especially if you are well away from retiring, acting on this information will reduce the financial and emotional stress if you need to apply to withdraw funds or access insurance.

What is superannuation?

Superannuation, commonly known as super, is the way most of us save for a life after work. It generally starts with contributions from our employer, which are paid into a nominated super fund and invested to help grow the amount you will receive when you retire.

 

 

Under the compulsory super guarantee, employers must pay 12 percent of employee’s regular earnings if they are over 18, or under 18 and working more than 30 hours a week. This applies to full-time, part-time and casual employees.

You can usually nominate the super fund you want the money paid into, and can top up the account with voluntary contributions, which are capped before tax penalties kick in.

Australians have more than $4.2 trillion invested in super, though the number of funds is declining as more merge to form bigger groups.

Types of superannuation benefits

Your preservation age – the age at which you are entitled to withdraw your super – is not the same as your pension age. It depends on when you were born.

Transition to retirement payments enable you to continue working part-time when you reach retirement age and receive a regular income stream from your super to top up those earnings, if you meet eligibility criteria.

 

 

Can your superannuation be accessed early? It depends on the circumstances. You can apply for superannuation benefits such as life insurance and total and permanent disability (TPD) or income protection in certain circumstances. These include:

• • Severe financial hardship – you will need to apply directly to your super fund and meet certain guidelines.
  • Terminal medical condition – this requires sign-off from two registered medical practitioners, one of whom is a specialist in your condition.
  • Compassionate grounds – this includes medical treatment for you or a dependant; palliative care for you or a dependant; funeral or burial expenses of your dependant; preventing the forced sale of your home.
  • Temporary or permanent incapacity – if you are unable to work temporarily due to a physical or mental medical condition, you may be able to access insurance benefits linked to your account. If you are permanently incapacitated, you can apply to receive your super as a lump sum or via regular payments.

If you feel you have been unfairly rejected for any of the above, there are steps you can take before lodging a formal complaint.

 

 

Binding vs non-binding nominations

Superannuation can also be a substantial inheritance. To ensure your loved ones are taken care of, it is very important to make it clear who is entitled to your superannuation benefits. This means wrapping your head around binding vs non-binding nominations.

Research by Super Consumers Australia found that about 6.5 million Australians will not have a say in who inherits their super.

More than a third of those surveyed had no death benefit nomination registered with their super fund, and only a quarter of those surveyed had completed a binding nomination.

A binding nomination compels the super fund to pay the nominated beneficiary, while a non-binding nomination only records your wishes. With the latter, the super fund has some discretion over who gets your money, with others able to make claims after your death.

While non-binding nominations are usually easily available to fill out online, many funds require you to fill out a paper form for a binding nomination and to sign it in front of two witnesses. Most binding nominations lapse every few years, putting the onus on super members to ensure theirs remain legally valid.

Check your superannuation benefits

Like so many other things that happen automatically, it's easy to set and forget super beyond checking your balance once a year.

But it is very important not just for your future but for your family’s that you take the time to go over your policy in detail.

Check that you have a binding nomination and, if not, make it a priority. Be clear about who is to receive your money and how much. If those circumstances change – for example, you divorce – be sure to update the nomination as soon as possible.

 

 

Assess the level of cover for life insurance or TPD, as well as eligibility, exclusions and waiting periods. You may want to increase the amount of insurance, for example, or consider switching super funds. Use a comparison tool such as Canstar or SuperRatings to weigh the pros and cons of different funds.

Common superannuation issues

The Australian Securities and Investments Commission (ASIC) was scathing of the super industry’s handling of insurance claims in a review earlier this year.

Citing excessive delays and poor customer service, the financial watchdog said the industry needed to do better.

ASIC Commissioner Simone Constant said many of the complaints they read were distressing. “We saw deep grief, vulnerability, frustration and genuine suffering,” she said. “The money from a death benefit can make a huge difference and each day a trustee delays that payment causes real harm to families.”

Common reasons for delayed or denied claims include incomplete paperwork, pre-existing conditions and policy exclusions.

While complaints to the Australian Financial Complaints Authority (AFCA) were down by 16 percent to 6164 in the year to June 30, Chief Ombudsman David Locke expressed concern that the three main issues were related to service quality.

If you are experiencing difficulties accessing your superannuation, or any other issue with your super fund, make a complaint with us and we will help you handle it.