Earlier this year, five super funds failed the Australian regulator’s annual test based on their investment performance, fees and costs.
Four of those funds failed for the second time in a row, which means they can no longer accept new members.
Do you know if your super fund is hitting the mark?
Even if it wasn’t one of the bad guys this year, it’s a timely reminder to check how your fund shapes up and make sure it’s working for you – not the other way round.
A quick explainer: How super funds work
To figure out whether it might be worth switching, let’s take a look at how super funds work.
Read: Super returns may end the year in the black, say analysts
When your employer (or you) puts your money into a super fund, the fund invests that money for you until you retire.
Funds invest in different assets, such as property, shares and cash. You can typically choose whether you want your money invested in high-growth (but higher-risk) assets, or more stable (but lower-risk) assets.
Super performance covers how much your fund has earned on those investments over time.
Signs you might want to move super funds
One of the biggest signs you might want to switch is if your fund’s performance is below the industry average and has been for a while.
Read: Call for radical rethink of ‘flawed’ super fund fees
For example, the average investment return for a balanced growth option over the past five years is 5 per cent. If your fund’s five-year performance is below that, it could be time to explore other options.
Be aware: It’s important to compare apples to apples. So if you’re with a high-growth fund, for example, compare against the performance of other high-growth funds rather than balanced or conservative funds.
Keep in mind super performance is just one piece of the puzzle. Some other reasons you might want to move funds include:
- high fees.
- limited or expensive insurance options
- you don’t like what your current fund invests in
- bad customer service
- you want to combine multiple funds into one.
Things to look at when comparing funds
If you’re thinking about switching, the government’s YourSuper tool is handy for comparing different funds’ performances side by side. You can also check average investment returns on super funds’ websites.
As a general rule of thumb, it’s a good idea to look at performance over a long period, such as five years.
On top of that, consider:
Fees: How much will being a member cost you each year? How will this impact your retirement savings?
Investment options: Can you choose where your money is invested? Do the investment options suit your goals and preferences?
Features: What other benefits are available, for example insurance or free super advice?
So, how do you actually move funds?
Whether you want to move to a new fund or consolidate multiple funds into one, you’ll need to:
- head to my.gov.au and login or create an account
- link your myGov account to the Australian Taxation Office (ATO), if it’s not already linked
- go to the ATO section of your account
- click on ‘Super’ then ‘Fund details’
- Click ‘Compare super’ to compare funds and transfer your super balance.
You can also contact your new fund directly to arrange a transfer of your balance.
Read: More Aussies making extra super contributions
Why your super matters
Your super balance can affect how soon and how comfortably you can retire.
Data from the ABC reveals that switching to a better investment option or fund could increase your nest egg by $100,000 or more. Super is generally one of the most tax-effective ways to save for retirement.
The bottom line
Set aside time each year (or more often if you can) to make sure you’re on target for the kind of retirement you want.
If your fund has been underperforming for a long time, has high fees or doesn’t offer the kind of investments you’re looking for, switching might be the right choice for you.
Be aware: If you move funds, your life insurance benefits could stop or change, so it’s always worthwhile to compare different providers.
This article originally appeared on Expert Analysis and is republished with permission.
Have you switched super funds? Did you find the process easy enough? Why not share your experience in the comments section below?
Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.
