How do I choose the right super fund?

Selecting the right super fund is critical for your future financial security. A job change is a great time to evaluate your options.

It might surprise you that there are 200 super funds managing $2.9 trillion in collective retirement savings for Australians. And each and every one is a little different. 

While we’ve had the power to switch funds since 2005, we’re far more likely to switch funds these days. That’s because the Royal Banking Commission created a strong switching mentality, encouraging Australians to choose a fund that will help them reach their desired standard of living in retirement. 

The impact of our decisions now, can have a major impact on our financial wellbeing later in life, so it’s hardly surprising that we’re more selective than ever.  

Yvonne Chu is the Head of Technical Services at Australian Unity. She explains that super is an extremely tax-efficient way to save for retirement.  

“If you’re saving for the long term and want to take advantage of government incentives, super is a great way to build for the future,” Yvonne says. “Aside from the family home, a superannuation nest egg is many Australians’ largest asset when they retire”.

When should you switch?

If you’ve landed a new job, it’s a great time to consider which super fund is right for you, Yvonne says.

Your employer will probably provide you with an information pack about the role, which is likely to include information about the business’s default super fund.

There’s no obligation to use that fund and you can shop around and choose your own fund., However, Yvonne urges Australians to at least consider the fund offered by your employer, which could benefit you more in the long run.

“Larger organisations can attract additional benefits from funds, such as life insurance and better levels of service,” Yvonne says.

How to decide on a super fund

Not all super funds are the same. When choosing your new super fund, it’s a good idea to consider the following.

All financial products or services attract fees. Fees are deducted before the fund passes on any investment returns to fund members, so if you’re paying high fees, they can eat into your returns. Fees may be referred to as administration fees, investment fees, advice fees or contribution fees.

Past performance
It’s worth taking a look at the fund’s financial performance by checking out their average returns in recent years and comparing these against your current fund. You can find out about most super funds by checking out their product disclosure statement or annual report, which is usually available on their website. Just keep in mind that past performance doesn’t indicate that the fund will perform well in the future.

Investment options
Super funds will invest your nest egg helping it grow over the decades while you work. Every fund approaches investment differently, depending on what fund managers believe will yield the best results for members. Most funds invest in a mix of asset classes, including cash, property, bonds, shares and fixed assets.

Consider how easy it is to deal with the fund. Large, reputable funds usually have better equipped contact centres to deal with member enquiries because they have the resources to do so. Look for a fund that makes switching easy. A rollover from your old super fund should only take a few minutes, and your new fund should handle all the paperwork for you. All you need to do is hand over your tax file number.

Also check whether the fund provides regular member communication or information seminars to help you learn how to grow your super. Lastly, check if the fund is transparent about their past financial performance.

Super funds sometimes offer automatic or default insurances for members. These include life cover, total and permanent disability insurance, and income protection insurance. It’s worth reading the fine print to understand how much cover you’re being offered, any inclusions or exclusions that could benefit you in the future and, of course, the fees involved. If you decide to switch, make sure that you transfer your insurance to the new fund before you rollover your funds, as otherwise you may not have continuous cover.

Most super funds also let you select from a range of investment options, including the weighting of different asset types. These usually include options such as:

  • growth
  • balanced
  • conservative
  • cash
  • ethical

Which option you choose should be based on your individual circumstances and your stage in life, as well as your risk profile.

Weighing it up

If you’re doing online research to find a fund that suits your needs, remember that comparison websites may not cover all your options. Also bear in mind that these sites make money in different ways, such as commissions paid by providers and sponsored links.

Whatever your retirement objectives are, and whatever your stage in life, it’s worth being aware of the large Australian funds are when you’re making your decision, Yvonne says.

People should also look beyond low fees, as you typically get what you pay for.

“No-frill funds often have limited features and service for members. On the other hand, industry funds can appear appealing on the surface, but may not have the transparency or control some members are after,” Yvonne says.

Experts recommend that you don’t just rely on the Super Guarantee, but that you top up your super with your own regular contributions; salary sacrificing is another good option to consider if you’ve just switched jobs.

Getting your super right is important, because the size of your nest egg can make a big difference later in life.

Important information

Any case studies, testimonials statements, names, performances, examples or any other information provided are for illustrative purposes only. We cannot guarantee that you will achieve the same or similar results or outcomes. The information provided is general information only and does not take into account your individual objectives, financial situation or needs. Before deciding to acquire any product or service mentioned, you should make reasonable enquiries, read the applicable disclosure documents (such as financial services guides, terms of use and conditions, fees and charges and the relevant Product Disclosure Statements), which are available via the links provided or from our website and seek professional financial, legal and tax advice. You may also request a copy of any of the applicable disclosure documents. For more information, please contact us.