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 & product Past five-year return Admin fee Calculated fees on $50k balance
Hostplus - Hostplus Superannuation Fund 9.57% $78 $608
QSuper - QSuper Lifetime 9.44% $0 $465
AustralianSuper - AustralianSuper 9.44% $117 $447
UniSuper - UniSuper Accumulation - MySuper 9.31% $96 $366
MTAA Super - MTAA MySuper 9.05% $78 $503

*Note: Data last updated on 31 Jul 2019

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Learn more about superannuation

How do you find lost superannuation funds?

Lost superannuation refers to savings in an account that you’ve forgotten about. This can happen if you’ve opened several different accounts over the years while moving from job to job.

You can use your MyGov account to see details of all your superannuation accounts, including any you might have forgotten. Alternatively, you can fill in a ‘Searching for lost super’ form and send it to the Australian Taxation Office, which will then search on your behalf.

How do you find superannuation?

Lost superannuation refers to savings in an account that you’ve forgotten about. This can happen if you’ve opened several different accounts over the years while moving from job to job.

You can use your MyGov account to see details of all your superannuation accounts, including any you might have forgotten. Alternatively, you can fill in a ‘Searching for lost super’ form and send it to the Australian Taxation Office, which will then search on your behalf.

How do I combine several superannuation accounts into one account?

The process used to consolidate several superannuation accounts into one is the same process used to change superannuation funds. This can be done through your MyGov account or by filling out a rollover form and sending it to your chosen fund.

Can my employer use money from my superannuation account?

No, your employer can’t touch the money that is paid into your superannuation account.

What fees do superannuation funds charge?

Superannuation funds can charge a range of fees, including:

  • Activity-based fees – for specific, irregular services, such as splitting an account after a divorce
  • Administration fees – to cover the cost of managing your account
  • Advice fees – for personal investment advice
  • Buy/sell spread fees – when you make contributions, switches and withdrawals
  • Exit fees – when you close your account
  • Investment fees – to cover the cost of managing your investments
  • Switching fees – when you choose a new investment option within the same fund

What is MySuper?

MySuper accounts are basic, low-fee accounts. If you don’t nominate a superannuation fund, your employer must choose one for you that offers a MySuper account.

MySuper accounts offer two investment options:

  1. Single diversified investment strategy

Your fund assigns you a risk strategy and investment profile, which remain unchanged throughout your working life.

  1. Lifecycle investment strategy

Your fund assigns you an investment strategy based on your age, and then changes it as you get older. Younger workers are given strategies that emphasise growth assets

How do you open a superannuation account?

Opening a superannuation account is simple. When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You might want to provide your tax file number as well – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

How long after divorce can you claim superannuation?

You or your partner could be forced to surrender part of your superannuation if you divorce, just like with other assets.

You can file a claim for division of property – including superannuation – as soon as you divorce. However, the claim has to be filed within one year of the divorce.

Your superannuation could be affected even if you’re in a de facto relationship – that is, living together as a couple without being officially married.

In that case, the claim has to be filed within two years of the date of separation.

Either way, the first thing to consider is whether you’re a member of a standard, APRA-regulated superannuation fund or if you’re a member of a self-managed superannuation fund (SMSF), because different rules apply.

Standard superannuation funds

If your relationship breaks down, your superannuation savings might be divided by court order or by agreement.

The rules of the superannuation fund will dictate whether this transfer happens immediately, or in the future when the person who has to make the transfer is allowed to access the rest of their superannuation (i.e. at or near retirement).

Click here for more information.

SMSFs

If your relationship breaks down, you must continue to observe the trust deed of your SMSF.

So if you and your partner are both members of the same SMSF, neither party is allowed to use the fund to inflict ‘punishment’ – such as by excluding the other party from the decision-making process or refusing their request to roll their money into another superannuation fund.

This no-punishment rule applies even if the two parties are involved in legal proceedings.

Click here for more information.

Financial consequences

Superannuation funds often charge a fee for splitting accounts after a relationship breakdown.

Splitting superannuation can also impact the size of your total super balance and how your super is taxed.

Click here for more information.

How do you create a superannuation account?

Before you create a superannuation account, you’ll need to check if you’re allowed to choose your own fund. Most Australians can, but this option doesn’t apply to some workers who are covered by industrial agreements or who are members of defined benefits funds.

Assuming you are able to choose your own fund, the next step should be research, because there are more than 200 different superannuation funds in Australia.

Once you’ve decided on your preferred superannuation fund, head to that provider’s website, where you should be able to fill in an online application or download the appropriate forms. You’ll need your tax file number (assuming you don’t want to be charged a higher tax rate), your contact details and your employer’s details (if you’re employed).

Can I buy a house with my superannuation?

First home buyers are the only people who can use their superannuation to buy a property. The federal government has created the First Home Super Saver Scheme to help first home buyers save for a deposit. First home buyers can make voluntary contributions of up to $15,000 per year, and $30,000 in total, to their superannuation account. These contributions are taxed at 15 per cent, along with deemed earnings. Withdrawals are taxed at marginal tax rates minus a tax offset of 30 percentage points.

Voluntary contributions to the First Home Super Saver Scheme are not exempt from the $25,000 annual limit on concessional contributions. So if you pay $15,000 per year into the First Home Super Saver Scheme, you have to make sure that you don’t receive more than $10,000 in superannuation payments from your employer and any salary sacrificing.

How does superannuation work?

Superannuation is paid by employers to employees, at least once every three months. The ‘superannuation guarantee’ is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary. The guarantee is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Superannuation is generally taxed at 15 per cent. However, if you earn less than $37,000, you will be automatically reimbursed up to $500 of the tax you paid. Also, if your income plus concessional superannuation contributions exceed $250,000, you will also be charged Division 293 tax. This is an extra 15 per cent tax on your concessional contributions or the amount above $250,000 – whichever is lesser.

You can withdraw your superannuation when you meet the ‘conditions of release’. The conditions of release say you can claim your super when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working

 

Can I choose a superannuation fund or does my employer choose one for me?

Most people can choose their own superannuation fund. However, you might not have this option if you are a member of certain defined benefit funds or covered by certain industrial agreements. If you don’t choose a superannuation fund, your employer will choose one for you.

How much is superannuation in Australia?

Superannuation in Australia is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

How can I keep track of my superannuation?

Most funds will allow you to access your superannuation account online. Another option is to manage your superannuation through myGov, which is a government portal through which you can access a range of services, including Medicare, Centrelink, aged care and child support.