When was the last time you thought seriously about your super fund? While our superannuation is often one of the most significant financial assets of our lifetime, many of us barely consider it until we’re thinking seriously about retiring, which is often too late to make significant changes.
A lot of us haven’t looked at our super fund since we first consolidated the various default funds set up by our employers back when we first started working in short-term jobs. Switching from multiple super funds to just the one can help us maximise our savings and minimise the fees we’re paying, but that doesn’t mean superannuation can always be a “set and forget” account.
If you haven’t checked on your fund since you first consolidated your super, you could be in for a surprise. Even if you did your research and picked the best super fund for your needs, markets change over time, and your fund may no longer be offering the performance you expect. You may also find that your retirement money is being invested in industries that you don’t approve of, or that your super provider isn’t providing the standard of customer service you expect.
First State Super financial planner, Troy Ottens, says that it’s often worth considering your super early in life if possible.
"There is a compounding effect over time if you are paying higher fees or are in a super fund with persistent underperformance," he said. "This can reduce your wealth over time by tens or even hundreds of thousands of dollars. Having said that, it is never too late to optimise your financial affairs, including your super."
It’s often worth checking the superannuation fund market every few years to compare your super fund with other options out there. While past performance is not a reliable indicator of future performance, if another super fund looks like it may offer you a better deal, you may want to consider seeking professional advice about switching super funds.
You have options with super funds
While super funds usually have a default MySuper option that is intended to be a basic, low-cost option, according to Ottens, there are often other investment options available.
"When people change super funds, they may find that they have more investment options, financial advice options, differences in tax management, more online functionality and more frequent communication among other things," he said.
"It is important that the additional features are either relevant or valuable to you, especially if you are paying a higher amount of fees to have access to additional benefits and features."
Remember that the best super fund isn’t always the one that’s achieved the best performance, or the one with the lowest fees. It’s important to compare different super fund options and consider which features and benefits appeal most to you. These may include:
- Optional extras, like bundled insurance or banking products
- Specific investments, such as ethical investing
- Customer service, including easy-to-use online services and an easy-to-contact phone team
What happens if you switch super funds
If you choose to switch super funds, keep in mind that you may not receive all of the benefits it offers straight away, and that you’ll no longer have access to the benefits of your previous super fund. For example, changing your superannuation can affect your insurance cover.
"If individuals change to another super fund, they can expect a default amount of insurance cover offered," said First State Super’s Troy Ottens, who said people need to be aware of "the need to opt into this cover", as super funds that haven't received contributions for 16 months will be automatically opted out of insurance cover.
"Those who are under 25 and with balances under $6,000 will not receive automatic insurance cover unless they decide to opt in to have the cover," he told RateCity.
"It is also important to note that if a person moves the entirety of their super to another super fund, they will automatically cancel any personal insurance cover they have with their original super fund," he said.
Switching super funds isn’t as hard as many people believe. Often, you can manage the whole process online, and some super companies will be happy to take care of this for you. However, before you decide to switch, it’s important to compare different super fund options and make sure you’re confident your choice will be right for your personal finances and your retirement needs.
If you’re not sure of which super options may be best for you, consider getting in touch with a professional financial adviser for more help.