Financial advisor James Wrigley has identified a critical oversight that most Australians make with their superannuation: failing to properly nominate a beneficiary. In the new season of 7NEWS Money Talks powered by Vanguard, Wrigley revealed that eight out of ten times, either there is no nomination or an inappropriate nomination. "It happens all the time, so please fix that," he urged.
Beneficiary Nominations: The First Thing to Check
Wrigley advises people to check their beneficiary nomination before looking at fees, insurance, or investment options. "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. This simple check could prevent significant financial complications for loved ones.
Who Can You Nominate? The Narrow List
Surprisingly, superannuation does not automatically follow a will, and the list of eligible nominees is restricted. "You can only nominate your spouse, a partner, children, or someone who has some type of financial dependence on you," Wrigley explained. This excludes many relatives people might assume are eligible, such as siblings, parents, nieces, and nephews, unless they are financially dependent. "That's something that comes to bite people when it's too late," he warned.
The Catch: Relationship Verification Only at Payout
The super fund does not verify the relationship at the time of nomination; it only tests it when the death benefit is being paid out. To leave super to someone outside the narrow list, Wrigley recommends nominating the estate or will, and then having an appropriate will in place to distribute the funds accordingly.
Three Quick Checks for Your Super
Wrigley suggests a simple checklist: check your balance, check if you have any cap space available, and review your beneficiary nomination. He also advises matching investment options to your stage of life. Younger people may benefit from higher growth options, while those nearing retirement should consider lower-risk options to avoid a big drop in balance just before they need the money. He cautions against panic-switching after a weak year.
Be Careful Before Consolidating Super Funds
Consolidating multiple super funds can lead to losing valuable insurance policies. "If you've got four different super funds, you've probably got four different insurance policies, and you can generally claim on all four," Wrigley said. This could mean a larger payout for your family than if you consolidated into one fund. He advises careful consideration before switching or consolidating.
Ultimately, Wrigley emphasizes taking ownership of your super. "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. A two-minute check could make a significant difference.
