Time to read : 4 Minutes
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 first take a look at how super funds work.
💰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 like 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 switch
One of the biggest signs you might want to switch is if your super fund’s performance is below the industry average and has been that way for a while.
🫱 For example, the average investment return for a balanced growth super fund over the past five years is 5.0%. 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 of the 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 comparison tool is handy for comparing different funds’ performance 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 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.
Why your super matters
Super might be something for much further down the track, but it’ll really matter when you get there.
🏖️ Your final super balance can impact 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 quotes from different providers.
Go Deeper:
Should you get life insurance through super
Can I link my superannuation to my life insurance?
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
