How to Choose a Super Fund

With so many different options available, choosing a super fund can be challenging. But picking the right fund could help support your quality of life during retirement.

Read on to learn more about how to choose a super fund to suit your needs.

Overview of the Superannuation System in Australia

Superannuation is one of the main ways to save for your retirement. In Australia, your employer must pay a portion of your earnings into your super account. Your super fund will then manage your super balance and invest your savings on your behalf until you retire.

Why Choosing the Right Super Fund Matters

Choosing the right superannuation fund is important for safeguarding your financial future. The performance of your super fund directly affects your financial security come retirement. A well-managed super fund with consistent, high returns has the potential to boost your retirement savings so you can enjoy a comfortable lifestyle once you stop working.

With this in mind, it’s important to understand how super funds work so you can compare super funds to find a fund that works best for you.

Types of Super Funds

There are several different types of super funds, each catering to the different needs and preferences of its members.

Industry Funds

Industry super funds were originally established to serve workers from specific industries or sectors. Nowadays, most industry super funds are open to the public, but there are still a select few that are only available to people working in certain industries. 

Retail Funds

Retail super funds tend to be run by financial institutions, like banks or investment companies. They’re open to the public, meaning anyone can join. 

These funds often offer a wide range of investment options and comprehensive member services.

Corporate Funds

Corporate super funds are established by employers for their employees. They can be either defined benefit funds, where the retirement benefit is predetermined based on a formula, or accumulation funds, where the benefit is based on contributions and investment performance. 

These funds are not as common anymore but often offer tailored benefits and fees negotiated by the employer.

Public Sector Funds

Public sector super funds are designed for employees of federal and state government agencies. These funds may offer defined benefit schemes, which are typically more generous than private sector funds. 

They often have lower fees and additional benefits that are specifically tailored to public sector workers.

Self-Managed Super Funds (SMSFs)

SMSFs are private superannuation funds that you manage yourself, giving you broad control over investment decisions and strategies. They can have up to six members, which are typically family members or business partners. 

Although SMSFs offer flexibility and control, they also come with significant responsibility, strict reporting requirements and higher potential costs. SMSFs are generally more suited to individuals with substantial super savings who are comfortable with the additional responsibility of managing their investments.

Key Factors to Consider When Choosing a Super Fund

When it comes to choosing a super fund, there are several key factors to consider. From investment returns and fund performance to insurance cover and fees, here’s a close look at some of the elements you should weigh up when comparing super funds.

Fees and Costs

Super funds will often charge several different fees and costs, including administrative fees, investment fees and other fees, to manage your super balance. Not all funds charge the same fees, so it’s often worth exploring the costs when comparing super funds.

Administration Fees

The administration fees are the ongoing fees charged for managing your account. These fees can be charged as a fixed amount, a percentage of your super balance or a combination of the two.

Superhero Super’s administration fees, for example, is a combination of an asset-based fee of 0.35% per annum plus $1.00 per week ($52 per annum).1

Investment Management Fees

These are the fees and costs associated with managing the investment options within the fund, which are often displayed as a percentage figure.

Insurance Premiums

If your super fund includes insurance, it’s worth considering the cost of the premiums. Depending on where you are in your life, you may choose to opt out of the insurance cover offered by your super fund or take out a separate insurance cover. This can help to reduce some of the fees and costs that come with your super.

While it can be tempting to choose a super fund with competitive fees, it’s important to weigh these up against other important factors, your financial circumstances and your own personal objectives.

Investment Options

Super funds typically offer a range of investment options so you can choose how your money is invested.

Default (MySuper) Options

Some super funds offer a simple, low-cost option, known as a MySuper product. MySuper is designed to provide a straightforward and cost-effective investment option.

Superhero has its own MySuper product, which you can learn more about by visiting Superhero MySuper.

Investment Strategies (High Growth, Balanced, etc.)

Alternatively, you can join a choice super product that requires you to make an active choice about where your super is invested. These options typically include high growth, growth, balanced, conservative, cash and ethical investments to name a few.

Performance and Returns

Investing your super with a high-performing super fund can make a huge difference to your retirement savings.

Long-term vs. Short-term Performance

Review the fund’s past performance over the previous one, five and 10 years. Look for a fund that shows consistent performance, rather than one that has high returns in some years and poor returns in others.

When comparing the past performance of super funds, make sure you’re comparing like for like. It can often be challenging to compare some funds because not all are built equal. 

For example, one fund’s growth investment option may have a much higher or lower allocation to growth assets then another growth investment option. This can deliver significantly different returns across the same time period. 

It’s also worth noting that past performance isn’t necessarily a reliable indicator of future performance, so it’s important to compare super funds based on a range of factors.

Insurance Options

Super funds will often provide life, total and permanent disability (TPD) and income protection insurance for their members. Consider the cost of the insurance premiums and the level of coverage when comparing super funds. 

It’s important to read the terms and conditions of any insurance cover offered by super funds to understand the specifics of the coverage, exclusions and any conditions that apply. 

Life Insurance

Life insurance, also known as death cover, pays a lump sum or regular payment to you or your beneficiaries when you die or if you’re diagnosed with a terminal illness.

Total and Permanent Disability Insurance (TPD)

TPD insurance pays a lump sum or regular payment to you if you are totally or permanently disabled.

Income Protection Insurance

This type of insurance provides a regular income for a specified period of time (e.g. two years, five years or up to a certain age) if you’re unable to work due to temporary disability or illness.

Member Services and Support

Super funds can also differ in terms of the member services and support that they offer. Be sure to assess the quality of customer service, including the availability of financial advice, when you compare super funds. Check to see if the fund provides useful online tools, calculators and educational resources to help you get the most out of your super balance.

Comparing Super Funds

Gone are the days when you had to sit down with a pen and paper to compare super funds. Now you can use comparison websites, fund ratings and awards to help you choose a super fund.

Using Comparison Websites

You can easily compare super funds based on their fees and performance using a number of websites, including:

• The ATO’s YourSuper comparison tool,
• Canstar,
• Chant West,
• Morningstar,
• RateCity,
• SelectingSuper, and
• SuperRatings.

While these comparison websites can be convenient and helpful, it’s important to note that they may not cover all options. They’re also businesses that often profit from promoted links. With this in mind, it’s important to make sure your decision isn’t just based on a fund’s rating on a comparison site.

Reviewing Fund Ratings and Awards

Super fund ratings and awards are typically provided by independent agencies. Some of the prominent agencies that rate Australian super funds include:

• SuperRatings,
• Chant West,
• Morningstar, and
• Lonsec.

These agencies assess and compare super funds based on various criteria such as performance, fees, investment options and customer satisfaction. 

We’ve used SuperRatings for example, to review how Superhero Super’s fees compare against the industry’s median.

Again, be sure to check out ratings and awards from several agencies to get a balanced view. Additionally, don’t forget that awards and ratings are only one thing to consider when deciding if a super fund is right for you.

Making the Switch

You can decide to switch to another super fund anytime.  Just don’t forget to update your employer with your account details so you don’t miss out on your employer contributions.

How to Transfer Funds

If you’d like to move your super from your existing super fund to another, you’ll just need to request a rollover form from your new super fund to transfer your old super to the new one.

With Superhero Super, you will have the option to rollover your existing super fund with us during the registration process. Alternatively, you may speak to our customer support team via  chat or send us an email at super@superhero.com.au.

Consolidating Multiple Super Accounts

Consolidating your super involves transferring all of your super into one account. Once you’ve settled on a super account, you can transfer the balance of your other super accounts through the ATO website.² 

Conclusion

Importance of Regular Super Fund Review

Super funds are constantly changing, so it’s important to review your fund regularly to make sure it’s working for you.

If you’re on the hunt for a new super fund, you may want to check out Superhero Super. 

It may be worth reading Superhero Super’s PDS and TMD for more information before making your decision. Superhero Super Pty Ltd does not provide financial advice that considers your personal objectives, financial situation or particular needs. All investments carry risk so please consider carefully before investing. 

¹Holding limits and different fees apply to investments held by members in Superhero Super. Read the PDS for more information.

²Consider the effect that switching superannuation funds may have on your insurance and other related benefits. It is important to thoroughly review and understand the potential impact on your insurance coverage, fees, investment options, and other benefits before making any changes.