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Wednesday, 25 November 2015

Employer Superannuation benefits

The takeover of the company I work for has finally concluded the 'integration' phase -- some people have left, some people have been transferred overseas, and some people have transferred in from the US 'head office' to our office in Australia, either permanently, or for a short period to help us 'locals' transition to new systems, processes and policies that are the new standard. The final stage was to dump all our old job titles and get new ones selected from the standard set, and to switch our superannuation from the old Employer Fund to a new preferred Fund.

DW and I currently have our super in a SMSF, so we won't be 'rolling over' our current balance into the new Employer Fund, however I will nominate the new fund to receive our contributions from 1 Jan as the new fund has very low management fees (only 0.2% after a hefty rebate by our company) and has default amounts of Life/TPD insurance and Salary Continuance (Income Protection) insurance provided with the premiums rebated by the company.

Overall the new Employer Fund will provide around $150,000 worth of life/TPD insurance and 21 months of 75% salary continuance insurance (paid for up to two years after 90 days waiting period in cases of temporary disablement eg. a heart attack/stroke/accident etc.). Looking at some quotes from an online insurance broker, these two covers would otherwise cost me around $2,000 per annum in premiums, so it is definitely worthwhile to nominate to join this new Employer Fund for our ongoing superannuation contributions (SGL and salary sacrifice).

Ideally I'd like to have the 9.5% SGL contributions paid into this new fund, and keep my salary sacrifice contributions paid into our SMSF, but unfortunately we aren't allowed to have our employer superannuation contributions paid into two difference funds. However, I can always do an ad hoc 'rollover' into our SMSF if I want to (I'll have to check if there are any exit or rollover fees in the new fund).

Since our SMSF will no longer be receiving employer contributions after Jan 1 I'll cancel the monthly transfer of $5,000 from our SMSF bank account into our Vanguard HighGrowth Index Fund investment, and leave the remaining cash balance to provide for future SMSF tax and annual fee payments. There should also be sufficient cash available to fund the first 'pension' payout once we switch our SMSF into 'transition to retirement pension' (TRP or TRAP) mode once we hit the preservation age (57 for DW and myself). As we intend to 'recontribute' the pension amounts as an undeducted (nonconcessional) personal contribution every six months there only needs to be around 2% of the SMSF balance available in the bank account to avoid having to liquidate any of our Vanguard investment to fund the TRP payments.

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