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Contributions increase needs early framing

Carefully structuring and framing client discussions around boosting super contributions is necessary for clients aged under 45 and also requires the right timing.

Heffron SMSF Solutions head of customer Meg Heffron said that age bracket was typically still paying off a mortgage and salary sacrificing was not a priority, thus it was important to set some contribution targets.

“Let’s imagine you have a case where you’ve got a client who has a $400,000 mortgage and let’s say the interest is being paid at 5 per cent and they just had a salary increase,” Heffron told the SMSF Association National Conference in Adelaide last month.

“I think if I turned around to some of the 35 year olds in my office and said you should put more into super, [they’d say] no way.

“What if I said though that you’re about to get a salary increase?

“You’re not used to having that money, so maybe that’s the time to have the conversation with them around whether the extra $5000 a year goes into super rather than necessarily going towards their mortgage.”

She said while mathematically advisers often knew that salary sacrifice was the better option than paying off the mortgage, it was a hard decision to make emotionally for clients.

“Mortgage stress is a big deal for them, so the conversation around maybe putting in more than they have to into super is really hard,” she said.

“That’s the conversation that you, as advisers, are often having with them.

“But maybe the mortgage is not always the first choice whenever you get a pay rise.”

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