Net benefit and why it's important to your super

Shane: Hello. My name is Shane Hancock, and I am the General Manager, Retirement at AustralianSuper. And welcome to our podcast, The moments that count. Before we start, it's important to note that the information discussed in this podcast is general only and doesn't take into account your needs or personal objectives. You should assess your own financial situation and needs. Investment returns are not guaranteed. Past performance isn't a reliable indicator of future returns.

Today, this podcast is being recorded at our head office on the land of the Wurundjeri people of the Kulin Nation. I and AustralianSuper acknowledges the traditional custodians of country throughout Australia. We pay our respects to elders past and present and extend that respect to all Aboriginal and Torres Strait Islander people.

When it comes to super, it's not just about what you earn, it's what you keep that counts. Today we're unpacking the topic of net benefit, why it’s important and what it means for your super. Small differences sustained over time can quietly add up to big outcomes. To help explain this topic, there is no better person than Peter Treseder. Peter has been educating AustralianSuper members for over 20 years on the nuts and bolts of superannuation. Welcome, Peter and thanks for joining us.

Peter: Thanks for the invite, Shane. It's always good to talk about topics that are important to members.

Shane: Peter, can you explain what net benefit is, how it differs from investment returns and how it can impact someone's balance?

Peter: Net benefit is the number that really matters, Shane, when it comes to assessing how your fund's performing. It's long-term investment returns, a growing balance, insurance and other benefits are important, but it's the net benefit that shows the true value of a super fund. So net benefit is the investment return delivered to you by your super fund minus the administration and investment fees and costs, transaction costs and of course tax.

There are a few things that can have an influence on someone's super balance. Investment returns is one factor. At the end of the day, when you look at your super balance at retirement, the majority of your money has come from investment earnings, not what's gone in. But it's also important to consider the fees and costs you pay. It's the cost of investment fees, administration costs, the cost of insurance, tax, all that is money coming out, which leaves less money in your account to grow.

Super funds charge these fees to cover the cost of managing your super and investments, as well as providing other services that you receive as a member of that fund. The fee and how it's paid can differ. So in the end, it is the investment earnings, less costs, that gives you that net benefit. So, it's important to understand what those costs are that are coming out of your account.

Shane: Thanks Pete. So, it's important for members to understand that they're in a good performing fund and a fund that has appropriate fees that will give them that right balance at the end of the day.

Peter: That's right, and it's engaging with your super to find out what those fees are, what those costs are, and how you can potentially reduce them.

Shane: How do these small differences over time make a difference to your retirement, Pete?

Peter: It's the power of compounding interest. So, compounding is the important part of investing. In relation to your super, compounding is the investment return generated on the returns you've already earned. So, it's a bit like rolling a snowball down a hill. I don't know the physics of it, but as I roll the snowball down the hill, it gets bigger and bigger. That's what your fund is doing.

That's what your account is doing with compounding interest. So, lower fees, the more of your earnings that stay in your account and are reinvested, will increase that compounding effect.

Shane: So, you've talked a bit about investing your superannuation. Obviously everyone's superannuation is invested and there's different ways in which that money can be invested. Can you tell us a bit about the consideration in someone's investment and what are the options they have?

Peter: If you want to take a more active role, which a lot of people are now doing, more people are making investment choices. Sometimes when it comes to making a choice, members don't know what their risk profile is. So, we do have an investment risk profile tool on our website that can help members understand what their risk profile is and which investment options we have may best match up with their profile.

Shane: Thanks Pete. We often talk to members and refer the fact that superannuation is everyone's own investment, so you wouldn't forget about the money that's going into your bank account every month from your employer, so therefore you should take some interest in your superannuation.

In most cases, people are getting 12% of their salary going into superannuation, so it's a significant amount of money. We've covered a lot of considerations today. Can you give listeners a quick checklist on things they should consider when managing their superannuation?

Peter: The main one is, as you just alluded to there Shane, you've got 12% on top of your salary going into this thing called super. If you had 12% on top of your salary going into a bank account, you'd be all over it. So, engage with your super, understand what your super is, how it's growing, that you are receiving that 12% that you're eligible for, and then once you've engaged, you can take that next step and look at reviewing your investment options.

Is the option you've got the one that suits you best? Is the insurance cover you've got appropriate for your needs? AustralianSuper has a number of different work ratings, which is an influence on what the cost of insurance is. Have you made sure you've got the right work rating? You could also look at adding extra into your super. The more you put in, generally the more you take out.

But when it comes to getting money into super, you've got to choose the method that is going to be most effective for you. And again, it comes back to the more you've got in your account, the more it's going to earn. The less you're paying, the more it's going to earn. And finally, we're seeing a great uptake of the AustralianSuper app.

Having the power to engage with your super in the palm of your hand, members can see what their account's doing, and the convenience of having it to look at every day, if you're that engaged with your super, is there by downloading the AustralianSuper app.

Shane: Fantastic. Thanks, Pete. I think particularly the comments around reviewing your investment options, looking at your insurance, your work ratings that you talk about. So, in effect, if you're employed in an office, but your work rating might be blue collar, so you might be paying more insurance premiums than you should, or adding to your superannuation. And there are a range of different tools available through our website. So I'd encourage anyone who's not sure where to start, start with the website or give us a call to talk through how we can help you out with your superannuation and tailoring it to your needs.

Thanks for joining us today, Pete. As usual, you've taken a slightly confusing topic and made it very understandable for our listeners. So, thanks for joining us.

Peter: No worries, Shane.

Shane: Thank you for joining us today. If you're an AustralianSuper member and you would like to join us to share your story or have a question or topic you would like us to cover, then click the link in our show notes to get in touch. If you've enjoyed this podcast, subscribe and share with your friends and family. See you next time.