For most investment vehicles, financial experts often advise that you should not put all your eggs in one basket.

Simply put, this means that one should not concentrate all his resources in one investment area. When it comes to super funds, however, this principle is definitely not the ideal way to go.

Having multiple super accounts has major disadvantages. You might think that it will allow you to guarantee better retirement savings, but it is actually the other way around.

One important thing that you must know about super is that each fund has accompanying costs, such as administration fees and tax payables. So, if you have multiple super accounts under your name, you will need to settle all charges and taxes associated with each of your existing accounts.

Why consolidate super funds?

Maintaining a superannuation fund is an important step in establishing financial security for retirement years. But making a mistake during the accumulation phase can effectively stunt the growth of a person’s nest egg.

As mentioned, all managed super funds have accompanying costs – just imagine how much money some people have unknowingly spent if they have more than one fund.

The only way to cut excess expenses is to ensure that they only have one tax-effective super fund, as opposed to several small funds that they pay tax and management fees for.

Plus, it’s easier to keep track of how well a fund is really performing if there is only one account.

Where to transfer funds?

The Australian Securities and Investments Commission (ASIC) recommends that people should not simply choose the fund with the biggest balance or one fund from among the ones they already have without assessing them.

To get the most out of retirement benefits, it’s best to go back to the product disclosure statement of each fund or contact the fund management company to discuss its details, including annual returns and fees.

Those with multiple funds should determine if any of the funds is a perfect match to their retirement goals and decide from there. If none of the existing funds seems to align with their goals, shop for a new one with an acceptable management fee and insurance coverage and open a new account once the fund confirms that they can accept rollovers from other funds.

Things to consider before consolidating super funds

Rolling over all contributions and earnings from one fund to another is a serious decision. Before actually doing it, make sure to consider the following things:

1. Type of fund to be transferred
Will all the transfers come from retail or industry funds or a defined benefit fund? Knowing the type of super you have is important because defined benefit funds have special treatments, so it’s best to ensure that closing that account was not done by accident.

Those who have a defined benefit fund are advised to speak to a financial adviser.

2. Types of investments within the fund
Transferring contributions, earnings and other benefits from one fund to another takes time, but it will take longer if some assets within the fund are illiquid.

In most cases, these illiquid assets may have to be sold before a transfer can be executed.

3. Entry or exit fees
Fund managers are required to inform members if there are accompanying entry and exit fees when rolling over funds. Be aware of these because these additional fees can further decrease retirement savings.

Along with entry and exit fees, ask if the fund actually allows transfers and if there are any other documents needed or steps to take before actually being allowed to make the transfer.

4. Accessibility
It’s important for a person’s employer to have access to their preferred fund, because if not, it defeats the purpose of consolidating funds.

If the employer can access the preferred account, they must be informed of the change, so they can contribute to the correct fund.

5. Applicable taxes
It is important to talk to an adviser when transferring supers if there is a significant amount of money involved.

Don’t forget: The Australian Taxation Office (ATO) has set annual contribution caps, so members may get taxed for excess contributions if they don’t carefully plan the transfers.

Likewise, the proportion of concessional and non-concessional contributions may be recomputed once the receiving fund obtains them. There are ways to maintain the proportion of taxable and non-taxable components, but it will require planning the schedule of transfers.

6. Insurance
The receiving fund may not offer the same insurance coverage as the sending fund, especially if the member transfers contributions and benefits to a less expensive product.

How to consolidate superannuation funds?

The fund owner may transfer the funds themselves or have someone else do the work for them. The government or fund managers can work on the transfer, but owners still have to do at least the first part of the work: requesting the transfer.

But before you start consolidating your super funds, make sure to take a look first on this checklist:

• identification document (e.g. valid IDs such as passport, national identity card, driver’s licence, birth certificate, etc)
• tax file number
• superannuation product identification number
• unique superannuation identifier
• other important details of your previous fund

There are two ways to consolidate: old school paper request or online. Either is fine as long as the correct form (NAT 71223) is submitted and all the necessary information are provided.

Here is how to do it:

Paper transfer

Step 1 - Go to the ATO’s official website (ato.gov.au) and download a rollover initiation form (NAT 71223).

Step 2 - Fill out a form for each super fund you are transferring super money from. Make sure that you input all details accordingly.

Step 3 - After filling out a rollover initiation form for each fund, send it to the fund you want to retain.

After completing all the steps above, your chosen super fund will contact the other funds and request for the transfer. The transfer of your super money will take a couple of days or weeks – usually within 30 days since the request – depending on the super fund you are transferring from.

Online transfer

Step 1 - Log in to your myGov account. If you do not have one yet, simply access my.gov.au, create an account, and link the myGov account to the ATO.

Step 2 - Once the account is linked, go to the “Super” tab, where you will be able to see all your existing super accounts.

Step 3 - Choose the fund which you want to keep and transfer all the balance from other funds into that preferred account.

After completing all the steps, your funds will transfer your super money to your preferred account. Take note that the transfer will usually take three or more days before being finalized.

Other types of transfer

Some funds have their own version of form NAT 71223 where all company information is provided. Make sure to check with the company first before wasting paper and your efforts.

• Managed super to SMSF - The NAT 71223 form only applies for transfers between managed super funds, so for those who belong to a self-managed super fund (SMSF), use the “Rollover initiation request to transfer whole balance of superannuation benefits to your self-managed super fund” (NAT 74662) form instead.
• SMSF to managed super -For those winding up their SMSF, they must first accomplish all the ATO requirements for winding up an SMSF.
  
  Part of the process is to pay out benefits to members or rollover the members’ funds to another complying fund. To do this, trustees will need to fill in multiple copies of the NAT 71223 and the rollover benefits statement (NAT 70944) for the member(s), the receiving fund and as documentation for the wound-up SMSF.
  
  If there is more than one trustee, winding up the SMSF is not necessary, but trustees still have to fill out the forms listed above. All the members and the receiving fund must be given a copy of the document, and trustees should also keep a copy for SMSF documentation for at least five years.

Remember: The point of consolidating multiple super funds is to save money on fees and, hopefully, achieve higher returns from a bigger capital. Make sure to cover all the bases and make informed decisions