At the third ‘Women and Superannuation’ workshop Fran and I delivered for WA’s Department of Local Government and Communities, we met Candice (not her real name). She shared her story of superannuation woe.
- One fund her current employer was paying into.
- One fund hanging around from her previous employer.
How does this happen?
- Your balance is $X.
- You pay fees and premiums ($Y), which usually includes:
- An insurance premium for life and permanent disability insurance. Not everyone does this as it is elective. Some people add in other types of insurance like income protection.
- A fixed fee as a member of the fund
- A direct variable fee, depending on how your investment mix performed, and
- An indirect variable fee within the investment mix you’ve chosen.
- You earn (or lose) capital depending on how your investment performs. This is generally represented a percentage, so we’ll call it Z%.
- Your balance goes up if your capital earnings are more than the fees and premiums (Z% of $X > $Y)
- Your balance stays the same if your capital earning are the same as your fees and premiums (Z% of $X = $Y)
- Your balance goes down if your capital earnings are less than the fees and premiums (Z% of $X < $Y)
No, really. How the hell does this happen?
Like me, I bet you’re thinking:
- How is this even legal?
- Why didn’t the company warn her that her funds were being eaten away?
- Why did she ignore it?
- the company’s systems are abysmal, or
- they stick their head in the sand in cases like this, because in the end they get the money anyway.
- Do you know the balance?
- Do you know what % fees you pay?
- Do you know hat your life insurance premium is, if any?
- Do you know what mix of assets you’re in?
The double whammy for women
It’s worse for women for two reasons:
- The gender pay gap: We’re paid less, so we get less super.
- Career breaks: we are more likely to take extended breaks from work for family, so we get less super.
Here are two things you can do in under 10 minutes – RIGHT NOW – to reduce your chances of ending up in Candice’s situation:
- Check your super accounts. Here’s a SlideShare I created recently with the step-by-step process using myGov. Rolling them into one is generally a good idea so you reduce your fixed fee component.
- Calculate your fees. What are the direct and indirect costs of your investment on your super statement? Turn that into an annual %. If it’s over 1.5%, you could do better – time to shop around. Try the MoneySmart suggestions for comparison websites.
If you’re in Perth, you might like to come along to one of the DLGC’s ‘Women and Superannuation’ sessions. Get yourself on the waiting list to learn when the next sessions will be run.
We teach adults how to get on top of their finances so they can stop work sooner and stop losing sleep over money. Part of that is, of course, teaching them how to get into the situations you’ve just read about in the first place. If that sounds good to you, check out our course on Achieving Financial Independence.
You may also like to check out our Facebook page, where we share articles and video tips. Given you’re reading about bankruptcy, you may be interested in reading our tips on credit cards, avoiding the Struggle Street trap, and some wonderful free and cheap financial education resources you can access, including people to talk to for advice.
For those in debt and not quite at the stage of bankruptcy, we also have a free course called ‘Get out of debt fast’. You’ll find it on our homepage.