As a financial advisor, one of the questions I frequently encounter from married clients is whether they should consider merging their super balances into a single account. At first glance, this might appear to be a practical and straightforward idea, but in reality, it's not as simple as it seems, and the actual benefits are often quite limited. Let's explore why combining super balances for married couples might not be the golden ticket to financial prosperity.
Contrary to popular belief, there's no direct and effortless method to transfer one person's super balance into their partner's account. The only way to combine super balances is by withdrawing the funds from one spouse's super fund and then contributing them to the other spouse's fund. However, it's essential to remember that this process is subject to certain conditions and limitations.
Firstly, to withdraw the balance from one's super account, a condition of release must be met. Common conditions include reaching preservation age and retiring or reaching the age of 65. In some cases, specific circumstances such as severe financial hardship or permanent disability might also allow for early access to super.
Secondly, contribution caps apply to the funds being transferred. The government imposes annual limits on the amount of money individuals can contribute to their super accounts without incurring extra taxes. Combining superanuation may not always be possible if the balance is over the contribution limits
Considering the effort and restrictions involved, one might expect substantial benefits from combining super balances. However, in reality, the advantages are often minimal. Most commonly cited benefit is a potential reduction in fees. By having a single super account instead of two, married couples may save on administration costs and other associated fees. While this might be true to some extent, the actual amount saved is usually not significant. Super funds often have competitive fee structures for joint accounts already, making the difference rather negligible.
This blog contains general and factual information and does not take into account anyone's individual objectives, financial situation, needs or tax circumstances. We strongly recommend you contact one of our Advisers if you would like personal advice.
Redpoint Investment Holdings Pty Ltd (trading as CY Financial Advice), is a corporate authorised representative (No. 378099) of CY Financial Services (AFSL No. 509648)