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Why it’s so important to consolidate your super

Why it’s so important to consolidate your super

For many money-savvy Australians, paying exorbitant fees on any financial product or service is a nightmare.

But imagine paying high fees on multiple products which are basically the same thing.

Two thirds of people starting a new job go with the default superannuation their employer has opted for, the Productivity Commission estimates. If you’re doing this while already holding an existing superannuation account, chances are you’re forking out numerous sets of fees for another account.

The simple and most likely reason for this is it’s easier to let your employer do the hard work of arranging a super fund for you, despite the multiple charges you’ll be slugged with.

It’s on you to do the paperwork and let your employer know if you want your superannuation from your new job to be paid into your existing account.

And as annoying as it may be, you could consider consolidating your super so you don’t end up paying multiple fees to multiple super accounts.

Out of the 15.6 million people in Australia who have a super account, about 39 per cent have more than one account, according to the Australian Taxation Office (ATO). That’s more than six million Aussies who are potentially paying for something they’re already paying for.

Apart from the fees, some super accounts come with life insurance, including death cover, total and permanent disability cover and income protection cover.

If you’re covered by any insurance through your super, you’re going to be charged insurance premiums, which will be deducted from the funds in your super account.

This is another reason to avoid multiple super accounts – you could be inadvertently duplicating insurance attached to your super and paying multiple premiums.

But it’s important to remember that when you switch super accounts or move your super into one fund, you may not be covered by the same insurance protection. Be aware of your new super account’s implications for your insurance cover.

And you could be paying more in administrations fees and premiums when you switch or consolidate super. Make sure you compare these by reading the product disclosure statement and know what you’re signing up for, as high fees can potentially eat up your super balance over time.

The good news is Australians are becoming more aware of the pitfalls of multiple super accounts.

The proportion of people with multiple accounts have been steadily declining between 2014 and 2017, the latest data from ATO shows. About 26 per cent of Aussies had two super accounts in 2014, dropping to 24.49 per cent in 2017.

And 19 per cent of people had three or more super accounts in 2014, a number which went down to 15 per cent in 2017.

Almost everyone can choose their own superannuation fund (except people covered by industrial agreements and member of defined benefit funds). So, why not exercise your right and avoid multiple accounts, rather than sticking with your employer’s default?

Quick guide to consolidating your super

  1. Try contacting your existing fund to see if they will consolidate your super for you.
  2. If they don’t offer this service, or you prefer to do it yourself, create a myGov account if you don’t already have one. Otherwise, login to your myGov account.
  3. Link the ATO to your account. Go to the ATO section.
  4. Click the Super tab. Here, you should be able to find details of all your super and super accounts (if you have more than one that you might have forgotten about).
  5. Decide which one you want to have as your primary super account and transfer the money from the other account(s) to your chosen one. Your money should be transferred within three days.
  6. Let your employer know which super account to pay your super into for future payments.

Top 5 performing superannuation funds (past five-year return)

Company & productPast five-year returnAdmin feeCalculated fees on $50k balance
Hostplus - Hostplus Superannuation Fund9.57%$78$608
QSuper - QSuper Lifetime9.44%$0$465
AustralianSuper - AustralianSuper9.44%$117$447
UniSuper - UniSuper Accumulation - MySuper9.31%$96$366
MTAA Super - MTAA MySuper9.05%$78$503

*Note: Data last updated on 31 Jul 2019

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This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.

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