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How to choose your retirement plan

Retirement plan

Deciding on a retirement plan is like choosing the best vehicle to ride to a person’s dream vacation destination on the other side of the world: there are many factors to consider before actually getting on board.

According to the Association of Superannuation Funds of Australia (ASFA) report, there are 221 existing Australian Prudential Regulation Authority (APRA) regulated funds as of June 2018— and, in all likelihood, no two funds are set up the same way.

The number of options that could make or break a person’s dream retirement makes freedom of choice seem more like a burden, but choosing the most appropriate retirement plan doesn’t have to be so scary. Here are some factors to consider to guide a person in making the right choice.

Top consideration: You

A retirement plan’s sole purpose is to generate funds that the individual will benefit from in their retirement years. This means the individual will need to actively contribute or sacrifice money during their working years.


Even if employers make guaranteed contributions in their employees’ retirement fund, it is ultimately the employee’s responsibility to make the right choices. This is why it is important to choose or switch to an appropriate retirement plan as early as possible, instead of regretting inaction during retirement.

A person should know their retirement objectives before making a decision. They may try envisioning their dream retirement to determine the lifestyle they want: modest, comfortable or luxurious. They should also consider their current age and how many years they have left to bulk up savings and investments before their planned retirement age.

Once there’s a definite objective in mind, they must find a fund that is best suited to achieving it.

There are also many retirement tools that may be used to make various assumptions—including the calculator in the Australian Securities and Investments Commission’s (ASIC’s) Moneysmart page—that can work out how much income may be expected in retirement.

Different calculators have different assumptions so it’s best to not be satisfied using just one or two.

Research and compare various managed super funds

According to a 2017 retirement income report, 50 per cent retired earlier than they planned, and the biggest reasons for the unexpected early retirement are health issues (37 per cent) and accident or disability (11 per cent). Only 10 per cent of the surveyed Australians felt they were prepared for retirement. A person should aim to be part of that 10 per cent when researching their own retirement.

What to look for when choosing retirement plans

A retirement plan is a valuable and powerful tool to have in order to secure a person’s finances in their senior years—when continuing to work should ideally be a matter of choice, not necessity. This is why it is really important to choose wisely before handing fund managers the power to shape future finances.

When selecting a professionally managed retirement plan, consider the following factors:

  • Life of the fund
  • Insurance
  • Fees
  • Benefits and other services

Life of the fund

  • Past: Research about the fund’s background and historical performance. This will give an idea if the fund manager simply has a silver tongue without actual delivery or the company can really achieve its promised returns.

    Talk to retired members, if available, and ask about their experience both with the fund’s performance and the people who manage their money. Ask what their retirement objectives were, the problems they encountered with the fund (if any) and if they have other recommendations.
  • Present: Ask about the type and array of investments available. Most funds have pre-mixed investments ready for clients, while other funds allow their clients to mix and match their own portfolio.

    Research how well the fund performed in recent years and how consistent the returns are. The investment market may be volatile but good fund managers are trained in risk management—having an idea of how well the company can help its members is also important.

    Check if there are any changes to the organisation that could affect how funds are managed. Try to interview people who are enrolled in the same fund and ask whether they are satisfied with how their money is being handled.

  • Future: Ask the company outright if there are foreseeable management changes, such as acquisitions, mergers or demergers, and have them explain what this would mean for the funds.

    This will determine which company will ultimately handle the management of its members’ finances, in the face of a demerger.


Many managed funds already come with insurance but some members may not be as protected as they believe.

Insurance premiums and coverage vary for each managed fund so it’s important to ask the fund manager about the extent of the insurance. Members may be doomed to paying a high premium for insurance with minimum coverage or covered for circumstances that don’t apply to their situation. Some of these possible circumstances include age range and occupational hazards that a client may or may not be exposed to.


Fees are inescapable when it comes to managed funds. The amount members pay for fees will determine how large their nest egg can grow for retirement.

There are management and annual fees, performance fees, advisory fees (if applicable) and other superannuation fees. Some managed funds also charge withdrawal fees, whether a member is accessing contributions due to severe financial need (only when allowed by law) or as part of their transition to retirement income stream.

Members need to be aware of just how these fees will affect their fund’s balance. A retirement fund is supposed to be for the member’s benefit, so they should be aware of the applicable fees in the fund.

Don’t forget about taxes. Higher fees plus taxes can result in a smaller nest egg, no matter how a person looks at it.

Benefits and other services

It is also better to ask if there are other benefits or services extended to members of a given fund and how much those would cost.

A member may be happily investing in recommendations from the fund manager, only to discover later on that each advice already cost them hundreds or thousands of dollars in advisory fees.

Likewise, be clear about the expected type and level of service, especially for people who want the status of their fund to be readily accessible to them.

Current choices matter

When it comes to securing their financial future, the member’s choices matter.

Every person’s objectives and goals are unique, so it is important to ensure that one’s choices are aligned with their objectives and current circumstance.

This information has been sourced from APRA and ASFA.

How to choose your retirement plan
Retirement plan
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