As a CSS or PSS member you are probably in a stronger position leading into retirement with the security a CSS or PSS pension can offer. However, what about your spouse and tax planning? Here are 3 things to consider when managing your superannuation benefits.
Check Their Super Fund Fees
Get your spouse to check their superannuation fund – chances are they are probably paying a lot more fees than you are!
Whilst there has been some improvement in super fees over recent years there are still too many super funds where the fees and charges are excessive. We often find clients in the non-public sector stuck in superannuation funds where they may be paying upwards of 2% p.a. in ongoing administration and investment fees. That is not good value. Fees are usually the biggest factor stopping people accumulating a reasonable super balance for retirement.
So, what is good value? I generally see total superannuation fees (all administration and investment charges) below 1% to be of reasonable value. However, there are often opportunities to do better for superannuation balances over $150,000. In these circumstances fees of around 0.65% should be achievable.
If you think your spouse’s super could be doing better, please have them contact us for a complimentary phone discussion and superannuation appraisal.
Know Your Super Balance Cap
Be aware of your superannuation transfer balance cap. The ‘transfer balance cap’ is simply the amount of money you can transfer into the ‘retirement phase’ of superannuation. The limit increased from $1.6 million to $1.7 million, and yes that is a lot of money! However, different rules apply for PSS and CSS members who elect pension benefits when they retire. If you elect to, under PSS, or receive a pension under CSS any income over $100,000 p.a. will lose concessional tax treatment. Additionally, a multiplier of 16 x is applied to your pension to calculate the ‘transfer balance cap’ value. If you already have other superannuation and will be receiving a CSS or PSS pension when you retire you may be unwittingly close to your transfer balance cap.
A solution to an impending problem is usually multi-faceted and can include strategies such as:
- If you are already salary sacrificing/making concessional contributions into super and your spouse is receiving a taxable income, consider changing this to your spouse, if your spouse’s tax position warrants this.
- If you are salary sacrificing/making concessional contributions and your spouse is on a low income, consider spouse splitting contributions into a superannuation account for them.
- If you are both already salary sacrificing/making concessional contributions – then consider spouse splitting of your superannuation into their super account.
Review Insurance Premiums
What insurance premiums they are paying in their super? Frequently I come across pre-retirees in their 50s and 60s where their spouse has either overpriced or unnecessary insurance premiums unwittingly eroding their super account.
Many super funds have default insurance cover. As you near retirement your asset position may be such that you no longer require insurance or the insurance your spouse is paying would make little difference in the event of their death or incapacity. For example, some funds may only have default cover of $10,000 for Life and TPD for persons in their mid-50s. Is it worth paying for such immaterial cover?
In other cases, huge insurance benefits have been loaded onto people’s super. This may have been appropriate in your 30s or 40s, but do you need cover of such magnitude in your 50s or 60s? In some cases, I have seen premiums as much as $20,000 p.a. being taken from people’s superannuation account (often paying a healthy commission to whoever recommended the cover). The situation and level of cover has not been reviewed for years and people can be left tens to hundreds of thousand dollars worse off in their final super balance. For a complimentary initial phone discussion on you or your spouse’s superannuation and a free appraisal please contact us.
