Why can’t I withdraw from my super? It’s my money and I need it.

You’ve been working really hard, and your employer’s been putting away 9.5% of your pay into an account somewhere, doing something. You’re not too sure what it’s for or why you can’t touch it. You probably have lots of those accounts around from your previous jobs*. You call your super fund and you finally get your login details only to find that you can’t touch that money. How annoying, that’s money you’ve earned! Why can’t you touch it? You’ve got bills to pay, a deposit you’re saving to buy a house. The bottom line is that you can’t touch it because the government has entrusted your super fund to look after it for you until you retire. This is because of our ageing population and the government’s calculated population projections which show that there just won’t be enough Australians to sustain a full pension for everybody. Nevertheless, desperate times call for desperate measures, and there are some desperate times that the government has concessions for.

What are the circumstances in which I can withdraw my super early?

The sad reality is that the circumstances in which you can withdraw your super early are mostly pretty grim.

For starters, if you can prove to your super fund (and the government) that you’re in severe financial hardship, which includes you being on Centrelink benefits for some time, then you may be able to access some of it early.

If you’re in real financial or emotional strife because you can’t afford a medical treatment for yourself or a dependant; need to pay for a funeral, death or burial; must modify your house due to disability for you or a dependant; or finally, if you need to make a home loan payment to prevent you from losing your house – then you may qualify for early release of super on compassionate grounds.

If you’re terminally ill or are permanently or temporarily incapacitated, you may also be able to apply to withdraw your super early.

Finally, the least depressing scenario is if you change jobs and your super balance in that account equals to less than $200, then you may be able to withdraw it.

Note: If you wish to complete any super withdrawal, your best bet is to contact your super fund. Please note that your super fund cannot let you access your money unless you meet what’s called a ‘condition of release’, where they can legally let you withdraw it. Usually this is retirement but as discussed here, there are some other conditions of release that could apply to you. In other words, yelling at the super fund consultant probably won’t help you. You’d be far more likely to change the law if you wrote a letter to your local MP.

*If that’s the case, you might want to roll your super over into one fund but make sure you check what insurances you have inside that super fund.

How to protect your super & investments from additional adviser fees

There’s been a lot of negative talk in the media about financial advisers. In truth, I don’t deny that there are some decent advisers out there. However, as with any field, there are bound to be cowboys, so be sure to go to one who you’ve definitely seen does a good job.

One major thing to beware of is the types of fees your adviser might charge you. In addition to your fee for the Statement of Advice (SOA), which is the fact document with the recommendations that you pay for – you need to beware of the types of fees they charge in your super and investments.

It’s all well and good that you might have had your super in five places, and the adviser rolls it over for you into just one and you save on fees. That’s likely true. Just beware that despite recent Future of Financial Advice (FOFA) legislation, advisers can charge you on your returns.

Advisers, in addition to the fee you pay them for your SOA, can actually charge you fees on top of that from within your investments. For example, you can be charged a dollar or percentage fee, which can be called an ‘Adviser Service Fee’.

Note that these were previously mostly included into the costs in the past and paid for by the funds themselves, so these costs were hidden. Still, the adviser can slap on a $2000.00 (or however much they like) annual fee, plus a 1% fee on top of that. Or they can just do the 1%. This mightn’t seem like a lot, but if you’re in a conservative fund that earns 3 or 4% per year, then you’re taking away a quarter or more of your return. This means that for all of that effort, you’d be getting a rate similar to what term deposits are at the moment (which is currently in the 2-3% zone, depending on the amount).

As always, beware of what you sign. Read the Product Disclosure Statement (PDS). Never be pressured by your adviser about returns in your super or investments, because chances are they could be trying to pressure you into getting extra funds. They can skim your investments this way for many years, even after they’ve stopped being your adviser, depending on the administrative strength of your chosen managed or super fund.

Finally, remember – if it sounds too good to be true, it most likely is. Get a second opinion about the fees from someone else – be it another adviser. Good luck and I hope that you don’t pay for anything you shouldn’t be paying for.

Superannuation: super boring, yet super important.

Before I worked in wealth for one of the major super funds, I didn’t really understand the importance of super.

It was just that thing for which you had multiple accounts and you got a statement in the mail at the end of the year. Usually all it would show was that my balance was depleted.

Sometimes, my fund would give me my money back through account protection, where low-balance accounts (below $1,000.00) were protected from being eaten up by fees. This stopped being enforced by many super funds a couple of years ago.

So why the hell is super all that important anyway? Well really, the whole purpose of super is to try and have some funds available when you retire. This will then minimise the reliance on the aged pension pittance (note: these rates are fortnightly) and improve your living standard.

That’s why it is pretty difficult to get take your super out early unless you meet certain criteria. You can’t easily take it out because you’re in some temporary trouble. Please see the criteria link to see if you’re in trouble and would like to see if you qualify.

Rolling your super over into one fund

Unlike bank accounts and such, it actually matters if your super is in many places. The fees can be quite hefty and you don’t want to lose your money. Although you cannot access it today, this is still your money and you’ll want to access as much money as you can when you meet a condition of release.

The important thing will be to ensure that you pick a super fund and investment options which are in line with your risk profile and investment needs. Although there are general guidelines, if this all confuses you, I would recommend seeing a fee-for-service financial planner. Just make sure that you pay all of your adviser service fees upfront as a lump sum only.

Many banks and super funds have a free financial advising service over the phone that can help you figure out your risk profile for free if you’re an existing customer. Just be clear with them if you only want to find out your risk profile.

This will help you pick which investment within your fund to put your money into. You should also check up on the fees of each of your funds if you have many and pick based on that and performance. Again, if this sounds too annoying or complicated, please just see a financial planner/adviser.

Remember that most funds will allow you to roll your account over just by having your TFN. It’s not as much effort as before.

“But I’m young, and I don’t care” 

The answer is… I’m young too, and for now – you don’t care. You will care later though. Remember that you employer pays 9.5% worth of your salary into your super and they wouldn’t do that if they didn’t have to. They have to because the government has realised that it is unsustainable for the whole population to rely on the pension. Plus, do you really want to be in dire straits after working your whole life? The pension is not easy to live on if you’re a foodie like me; or if you want a comfortable life in your retirement.

I’ll do a more technical post later about super contribution caps and the such, but here’s a fantastic government resource about super from the ATO. I’ll also post the links to “Finance Favourites” on the side.

Note: I will do a separate post about insurance, including insurances within super (just to make it even more confusing).