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Retirement
What you should consider when changing super funds
Are you thinking of changing your superannuation fund because you want one with lower fees?
What you should consider when changing super funds
Are you thinking of changing your superannuation fund because you want one with lower fees?
Or perhaps you want to move your super balance to a fund with an investment strategy that is better aligned with your personal values? Is your company’s chosen super fund not meeting your performance standards?
There are a lot of reasons to switch your super funds, but it usually has the same goal: to find one that will truly fit your needs.
Having a super fund that is performing at its best is important to achieve financial independence during retirement. Switching to a low-fee, high-performing super fund early on in your life could help boost super balance by more than $100,000 by retirement. There are several different types of super fund, and choosing the right one will help build your nest egg for a comfortable life post-work.
To ensure you receive the returns you want for your future, here are some things to consider when changing your super funds.
Which super fund is best?
There is no answer to this question because there is no super fund that is one-size-fits-all. Financial advisers will tell you that the best super fund is the one that has the benefits and features that will best work for you and invests your hard-earned money in a cost and time efficient way.
Your chosen fund should leave you feeling assured that your money is properly managed and regulated. A good super fund will also give you the information and guidance you need to help you reach your retirement goals.
If you want to learn more about choosing the best super fund for you, read here.
Check if you can switch your fund
If you are employed, you should first check in with your company if you can switch to a super fund that you want to contribute to. Most people can choose the super fund they want, but in some circumstances, this may not be a choice. For example, you may not be able to choose a super fund because your company is under an industrial agreement or defined benefit super fund.
The best way to find out if you can transfer your super fund is to ask your employer. They may also be able to assist you with the process.
Factors to consider when changing super funds
Take a look at the different factors to consider when you decide to change your super funds.
1. Fees
The lower fees, the better. All superannuation funds charge fees, which can significantly vary between funds. Annual fees can range from hundreds to thousands of dollars, depending on the type of fund you have and the level of your super account balance. If your current super charges high fees, it can significantly affect your payout when you retire.
Generally, lower fees are desirable because high costs can detract from your savings and erode your super balance over time. When choosing your new super provider, make sure to compare fees across different accounts.
2. Performance
Before you choose a super fund to switch to, it’s a good practice to look at its performance trends for the last five-year to 10-year period and not just the previous year. It’s a good idea to look for a fund that has a long history of strong investment returns.
Remember that your super is a long-term investment, and a steady performance for an extended period of time can help make or break your savings. Also, when comparing the performance of funds, read the fine print on the taxes and fees charged.
But also keep in mind that performance alone is not a good reason to change your super funds. Make sure to take into consideration all the other factors that were listed and find a good middle ground.
3. Investment options
A good super fund should provide you several investment opportunities. It should also have options to suit your needs with minimal risk. Only compare funds that have similar investment strategies or those that have a similar mix of investments, including shares, fixed interest and cash.
When comparing super funds, study the different investment strategies offered by each fund to make sure they offer one that aligns with your investment strategy and the level of risk you’re comfortable taking on.
If you predict a change in your risk appetite in later years, choose a fund that will allow you to change your investment options.
4. Extra benefits
One of the most important things to consider before changing super funds is its benefits. Your employer can pay more than the 9.5 per cent minimum contribution for certain funds. If you also choose to give extra personal contributions, you can get benefits such as extra interest rate points and a bigger payout (as well as other long-term benefits) when you retire and reach your preservation age.
If this is a super fund quality that you prioritise, you can choose a super fund based on its term flexibility.
5. Insurance
Most industry funds offer income protection, life and total and permanent disability insurance. When choosing a superannuation fund, it’s important to check what cover is available and how much it’ll cost. Be aware that low-fee funds might not offer insurance, and this is something that should be considered in choosing your super fund or changing between funds.
6. Services
A lot of super funds offer package deals with special features and services, including financial advice or investment strategy advice. These services may be just costing you money that will accumulate over time. Make sure that you are not paying for services you won’t need. Do your research and know what services the funds provide and how they can help you with your goals, or if you need them in the first place.
7. Type of super fund
There are different types of funds to choose from. As we’ve mentioned, what works for one person doesn’t necessarily work for another. If you are making a switch, the best way to choose a super fund is to consider your personal circumstances and long-term objectives.
Here are the different types of super funds:
- Public sector funds
- MySuper
- Retail fund
- Industry fund
- Corporate fund
- Eligible rollover fund
- Self-managed super fund
- Accumulation fund
There are pros and cons to each of these funds, so make sure to take the time to select a fund that is appropriate to your retirement objectives. Read here to look more into the different types of super funds.
Conclusion
There are several factors involved in choosing the right super fund for you. If you are looking to change super funds, make sure that you find one that aligns with your financial goals and that will maximise your super balance to set you up for a successful retirement. Do your research – look into the features, benefits and annual fees for each fund before making the switch. And contrary to the usual belief, switching super funds is an easy process that can be done online in a short time.
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