You can almost hear the sighs of relief of thousands of Australian teenagers, who have recently completed their final Year 12 exams. It’s quite a milestone, and while some school leavers will step straight into full time work, many will take up casual or part-time jobs until uni or TAFE kicks off in 2017. It’s an exciting time, but it also brings adult responsibilities – like choosing a super fund.
Young workers are vulnerable to being ripped off. So the first step is to know your rights. If you are aged 18 or over and you earn more than $450 in a month in before-tax wages, you’re entitled to employer-paid super contributions worth 9.5% of ordinary (not overtime) earnings. It doesn't matter whether you're a full time, part time or casual worker, you’re still eligible for these compulsory super payments.
Workers aged under 18 can be eligible to receive super contributions though in addition to earning over $450 per month you will need to work more than 30 hours each week.
The next step is to choose a super fund. One option is to go with your employer’s ‘default fund’. This is a super fund the boss has chosen, and while it may be the easy path, it may not be the best fund for you.
It may seem like a hassle but it’s worth nominating a super fund of your own choosing. Our super system is awash with over $14 billion worth of lost and forgotten super savings – much of it the result of casual or part-time workers losing track of their super. Selecting your own fund increases the odds of staying in touch with your super throughout a working life.
There are two main types of fund to select from – retail and industry funds. Many industry funds operate on a non-profit basis, so the annual fees are low. Retail funds on the other hand, tend to offer a broader range of investment options.
Both have their merits. The main point is to take a look at the different options available. The government’s MoneySmart website offers plenty of pointers on what to consider when weighing up different funds.
The most important thing is to record the details of your super fund and your account number. This lets you notify new employers of your super fund so your super can go with you when you change jobs.
Don’t forget to notify the fund if you change your address, so you can track your super all the way through a long and varied career.
It’s also not a bad idea to consider whether you need the insurance cover offered by your fund – at least until you’re a bit more established in life. Young workers can easily lose 100% of their early super savings to insurance premiums. But once you’re more established and have financial commitments and dependants, it might be a good time to reconsider your insurance needs.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.
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