If you opened your super app today, you’d probably check your balance, maybe glance at the fees — and skip right past the single most important setting of all.
Financial advisor James Wrigley says that’s exactly the problem.
On the new season of 7NEWS Money Talks powered by Vanguard, he named the one thing people get wrong again and again: their beneficiary nomination.
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“Eight times out of ten, either there’s no nomination or an inappropriate nomination. It happens all the time, so please fix that,” he said.
It’s the first thing Wrigley tells people to look at — ahead of fees, insurance or investment options.
“Beneficiaries, we see time and time again people either not nominating a beneficiary or they thought they had what was called a binding nomination that’s lapsed,” he told host Tim McMillan.
You can’t leave your super to just anyone
The part that surprises most people is super doesn’t automatically follow your will, and the list of who you can directly nominate is narrow.
“You can only nominate… your spouse, a partner, children, or someone who has some type of financial dependence on you. So it’s a really narrow list,” Wrigley said.
That rules out a lot of the people you might assume.
“My brother or my sister or my parents, none of them are financially reliant on me… so I actually can’t nominate them as my superannuation beneficiary,” he said.
“Nieces and nephews, we see all the time — you can’t nominate your niece and nephew as beneficiary unless they’re dependent on you. That’s something that comes to bite people when it’s too late.”
The catch is that no one checks until it’s too late.
“The super fund doesn’t know the relationship between you and this person you’ve nominated,” Wrigley said.
That relationship is only tested at the time the death benefit is being paid out.”
If you want your super to go to someone outside that narrow list, there’s a workaround.
“You would nominate your estate or your will, and then you have an appropriate will in place that distributes the money to where you want it to go,” he said.
While you’re in there: three quick checks
Wrigley says a few minutes of attention can make a real difference.
His starting checklist is simple.
“Check your balance, check if you’ve got any cap space available, and then that beneficiary piece as well,” he said.
He’s also a fan of matching your investment option to your stage of life.
“The younger someone is, the more time they’ve got to ride out ups and downs, so a higher growth option might be the way to go,” he said.
“(But) as you get closer to 60 or 65, staying in that high-growth option is probably not right either. You don’t want a big drop-off in your balance a year or two before you’re about to use the money.”
And don’t panic-switch after a weak year.
“Don’t throw out the super fund just because you’ve had a lower year,” he said.
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Be careful before you consolidate
There’s one more trap Wrigley says doesn’t get talked about enough — the rush to roll all your accounts into one.
The insurance attached to old funds can be worth far more than the fees you’d save.
“If you’ve got four different super funds, you’ve probably got four different insurance policies, and you can generally claim on all four,” he said.
“So if you died, your family can get a payout on all four of those policies. That’s probably a lot more money than if you consolidated it all down into one. So be really careful with switching or consolidating super funds.”
The bottom line, in Wrigley’s words — take a little ownership.
“It’s these little contributions over a long period of time that will have an impact on what you’ll ultimately have in retirement,” he said.
And it starts with a two-minute check most of us have never done.
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Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFSL 227263) is the product issuer of Vanguard Personal Investor and the Vanguard Australian funds and ETFs. Vanguard Super Pty Ltd (ABN 73 643 614 386 / AFSL 526270) is the trustee of Vanguard Super. Read the relevant IDPS Guide, PDS and TMD available at vanguard.com.au and consider if a product is right for you before making an investment decision.
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All information in MoneyTalks is general in nature and does not take into account your personal circumstances. You should always seek independent, professional financial advice from a licensed expert before making any financial decisions. Past performance is not indicative of future results.
Our guests appeared on Money Talks voluntarily and did not receive any payment or benefit for their participation, or for mentioning any products or companies discussed in this podcast.
