Retired teacher Jim Clark knows how important it is to get the most out of superannuation – and it’s not just because he taught economics for four decades. Or maybe it is.
“I’ve always been interested in financial matters,” he explains. “My wife Gaye and I have a financially stable retirement based on the fact that over the last 30 years we took superannuation seriously.”
For each of those 30 years Jim has been with NGS Super and his decision has definitely paid dividends, with the fund recently ranked in the top 10 super funds based on performance over the 2017/18 financial year.
“If the Royal Commission has underlined anything, it’s that for-profit funds don’t provide the same level of service as the not-for-profit ones do,” says Mr Clark, now 62. “And the returns have been better in the not-for-profit ones because they’re fundamentally set up for the members’ benefit, not for the benefit of shareholders.”
In the decades since its inception in 1988, NGS Super has expanded from just one employee to 52, with nearly 100,000 members and $9 billion in funds under management.
And for Mr Clark, being a witness to his super fund’s growth and success is just as important as being a beneficiary. “Fundamentally people need to take an interest in where their money’s going,” he says. “Looking back, I’d give people the same advice now as I was given then… with a few add-ons.” Wisdom does come with hindsight, after all.
Take care of your own interests
Mr Clark first entered the workforce at 22 and has witnessed a seismic shift in attitudes towards both superannuation and workplace culture. “The workplace today has become in some ways a bit harsher,” he says. “Don’t think necessarily that your employer is going to look after you. You might get some flowers or a nice farewell afternoon tea, but that’ll be it. You need to think about your own financial future. That’s why superannuation is important.”
Although things have definitely changed since he first joined NGS Super, Mr Clark believes the principles of seeking out a suitable fund are still the same. “Look at how many members it has, as this will tell you a bit about the size of the fund,” he explains.
“Also examine fees, benefits and recent investment returns – preferably the long-term results. If you’re already a member, check what kind of investment options you have; are they still the right ones for you? Knowing what options you’re in is definitely important. You should be in options that suit your current life stage.”
Income protection is another crucial aspect you’ll need to consider when choosing between super funds. “It is so important, particularly if you’re in a family situation and only one of you is working full time,” Mr Clark adds.
“NGS, when it started out, wasn’t a big fund but now it’s grown to be sizeable, so it’s able to provide a suite of services. They developed income protection along the way and for basic income protection the industry superfund is a good, cheap option because you’re paying for it with your pre-tax dollars.”
Find the right person
For Mr Clark, while financial matters are certainly important, there’s one thing people should prioritise above all else: finding someone with whom they can share their lives. “I know today it’s all about career and money, but certainly finding the right partner is even more important,” he says, “and then the two of you work out together where you want to go and make a plan.”
That plan should include where you want to end up and when, plus how you aim to get there – and superannuation should be a huge part of it. “Most 30-year-olds don’t really perceive super as an immediate concern, but they should,” Mr Clark says. “Your employer may give you more than what is compulsory superannuation at the moment and you can look after your partner as well.”
At one point in their lives, after their two sons had left school, Mr Clark and his partner Gaye were salary sacrificing nearly all of Gaye’s salary into super. Since the recent superannuation changes to contribution limits, the principle remains the same. “Together, you and your partner should put in more than the basic amount,” he reinforces. “Fundamentally, 9.5 per cent isn’t going to do the business.”
Another important consideration for you and your partner is whether you want to have children, as the age at which you have them could impact your retirement. “I retired at least four years later than I thought I would when I was in my late twenties,” Mr Clark says. “My children happened when I was a bit older and I retired the year my youngest finished university. Having kids almost ten years later than I thought I would have, was a significant factor.”
When it comes to family life, Mr Clark encourages people to live in the moment: “Enjoy your children while they’re young, because they get old fast,” he laughs. “Between the ages of 4 and 12 is the best, because they’re toilet trained, they do what you ask and they’re interested in what you want to do, plus they go to bed when you want. Once they become teenagers life’s quite different.”
Aim for stability
In finance and in life, Mr Clark has one golden rule: “It may not sound all that flash, but a stable life is the secret to a happy one, at least for me,” he says. “Despite the fact that I’ve been interested in financial things, I certainly made one glaring financial error where I lost a lot of money thinking I could take an interest in shares. The impact of a financial loss is about double the impact of a gain and it churns you over, so it pays to be careful.”
For many younger people in the workforce, the best way to work towards stability is to get a foothold in the housing market, and it’s good for your retirement as well. “Housing is the big issue for young people today, particularly those living in and around capital cities, because so many retirees can only afford to live on their income because they own their own home,” explains Mr Clark. “If you own property then, in my view, investing in your superannuation up to the maximum amount you’re allowed would be the next best option, as long as you recognise that you’re not going to be able to access it until you retire.”
Mr Clark also warns against treating property as a trump card in your retirement portfolio, as you never know which way the market is going to go. “Don’t necessarily think when downsizing that you’re going to make money out of it,” he says. “You may if you leave a capital city, but if you want to stay near your family that could be difficult.”
Before you make any major financial decisions, it’s a good idea to shore up your financial future by getting good advice. Luckily, this is where your industry super fund can help. “Don’t just go to anybody; seek advice from someone you trust,” advises Mr Clark. “A good place to start is with your super fund. Most industry super funds have these services for members and they aren’t paid commissions based on selling you a product. They’re paid a salary to advise members what’s in their best interests. That’s what I would certainly suggest people do.”
All NGS Super members are eligible for a complimentary first consultation with its in-house financial planners.