Superannuation funds are increasingly offering term deposits for investors who prefer to minimise their exposure to the sharemarket while it remains in such a volatile state.
According to CANSTAR, four out of 11 of their 5-star rated public funds now offer clients the option of putting part of their money into a term deposit to balance out their portfolio.
In this uncertain market, term deposits have been an increasingly popular option in self-managed super funds but we’re now seeing this option being offered more widely across all superannuation funds.
Parking cash in super is something you may well do while waiting for the market to show signs of recovery. However, a term deposit has an added benerfit as the rate is locked in.
The downside is that your money is locked away for a certain period and unavailable to use for any other investing opportunity that might come up in the meantime.
The advantages of term deposits
Investing in term deposits inside superannuation also has tax advantages. The returns are only taxed at 15% compared to bank term deposits which attract marginal tax rates. Be aware though that term deposit options in super funds may not be government guaranteed so check with your fund if that is important to you and, while you’re there, check the interest your fund is offering on its term deposits.
Even if retirement is light years away, making the most of your superannuation starts with the mindset that this is your own long-term investment account and, as such, should always be factored into your financial plans.
There are over 350 superannuation funds in the market which are classified as retail funds, industry funds, corporate super, SMSF products, public sector super, wrap/platform accounts, master trusts etc.
Knowing what’s best for you is not always immediately apparent.
Funds are putting considerable effort into providing advice to people who are confused about super so don’t be afraid to call them and access the advice within the fund or talk to a financial advisor outside the fund.
Article updated 09/08/2012