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Transferring super from one fund to another

Super funds, superannuation, fund to fund

Anyone who happened to change their name, place of residence or switched jobs at any point in their working life may be the owner of multiple superannuation funds—and it’s not something to be excited about.

Financial experts often say “don’t put your eggs in one basket”, but having multiple superannuation accounts is not a way to follow this advice. Multiple superannuation funds are not only very costly but can even effectively shrink a person’s nest egg.

There are annual and management fees and tax payables accompany each super account. To ensure bigger retirement savings, the best course of action is to check how many supers one has and put them all together in one fund.

Why transfer funds?

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

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 which 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 seem 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.

How to transfer 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.

There are two ways to do this: 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’s how both ways are done.

Online transfer

The simplest way to consolidate super is to have the government process it.

Simply access www.my.gov.au and create an account, then link the myGov account to the Australian Taxation Office (ATO).

Once the account is linked, the owner will be able to see all their existing super accounts, including the ones that have already been forgotten. From there, it’s as simple as choosing which one to keep and transferring all the balance from other supers into that preferred account.

Just remember that the transfer isn’t instant—give the government a few days to work on the request.

Some funds also have an online facility for the request, but it may take them longer than a week to complete all transfers, depending on the type of assets in the investment portfolio.

Paper transfer

Paper transfers require the person to download, print and answer the ‘Rollover initiation request to transfer whole balance of superannuation benefits between funds’ (NAT 71223) form. Once accomplished, send the form to either the fund that will receive contributions or the ones that will send them, not to the ATO.

Take note that a completely filled in NAT 71223 form should be submitted for each fund you have, regardless if they are managed by the same company.

Other types of transfer

Some funds have their own version of form NAT 17223 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 17223 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 5 years.

Things to consider before transferring

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 advisor.

  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 advisor when rolling transferring supers if there is a significant amount of money involved.

    Don’t forget: 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.

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.

 

This information has been sourced from the Australian Taxation Office and ASIC’s Moneysmart.

Transferring super from one fund to another
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