Join the company scheme?

Why join the company scheme?

If your company offers a saving or super scheme, chances are it's worth considering joining.

Like any investment, you should check it out thoroughly, but many company schemes offer you benefits that you can't get on your own.

Check out the information on company schemes here or go straight to the questions to ask before you join.

What are company schemes?

In a company savings scheme, your money is pooled with your workmates and then usually invested by a professional investment fund manager.

The power of the pool

Chances are, the professional fund manager will get a better return on your pooled money than you could if you invested your money separately by yourself. The fund manager is also likely to charge your group lower fees than you'd be charged as an individual. On your own, you could be charged as much as 1.5%- 2.5% of your investment a year. In a company scheme, that could be as little as 0.3% a year, but typically, would be 0.5% - 0.7% a year. That's less than half the retail cost.

With most company schemes, you also get a better deal on life insurance, or disability insurance. Some even include a better deal on medical insurance.

Employer contributions

Some employers make a contribution to the company savings scheme to help you save. If your employer wants to pay you to save, say "yes please". You'll find it virtually impossible to beat the total returns on your own contributions (interest plus your employer's subsidy) by going on your own.

Employer pays the fees

Investments are like bank accounts. Somewhere along the line, there are fees to pay. Some employers pay the fees associated with the company savings schemes to make it easier for their employees to save. Although it might not seem like a huge amount, the long term effect of paying no fees can be quite surprising.

Fees include:

• Administration or membership fees ($60 - $120 a year), and
• Investment management fees that the employer rarely pays. (These come out of the investment returns, so are effectively paid by the member.)

Employer top-ups

An employer top-up, or subsidy, means that your employer contributes extra money alongside the money you pay into the scheme. For example, if you put in $10 per week, your employer also puts in $10 every week. Note: once withholding tax is paid, your $10 may end up as $6.70.

An employer top-up increases the value of your savings with no extra effort on your part. Usually there are conditions to be met before you get the subsidy. Be sure you fully understand those conditions. See our questions to ask before joining.

Employer top-up schemes can be the best of all company schemes. Like any investment you should check it out thoroughly, but chances are there will be very good reasons for joining.