Choosing a superannuation fund

Most employees have the right to choose which superannuation fund their superannuation guarantee contributions are paid into. However, many still use their employer's default super fund.

For those employees who aren’t eligible to choose a super fund, they are generally able to rollover (transfer) any existing super balances they have to the super fund of their choice.

It’s important to remember that your choice of superannuation fund isn’t necessarily permanent. You can change your superannuation fund at any time you find a fund that will better suit your needs.

Finding the best superannuation fund is a personal decision that depends on your specific needs.

While many individual seek financial advice in regard to the best super fund for them, here’s are a few questions to ask yourself  to help assess whether a super fund meets your needs.

Is it a ‘complying’ super fund?

Super funds must comply with superannuation and tax laws to receive concessional tax treatment.

In addition, an employer’s superannuation guarantee contributions must be made to a complying super fund to meet their legal obligations.

Can I join the super fund?

There are several different types of superannuation funds available but some limit their membership to certain individuals. An outline of the most common types of funds and their typical membership is below.

• Retail funds - operated by financial services organisations. Generally membership is open to all individuals.
• Industry funds - in the past these were usually established to cater to the needs of employees of a specific industry, but membership is now open to most individuals.
• Public sector funds - typically established for Federal or State Government employees only.
• Corporate funds - membership is usually limited to employees of a particular employer group. Spouses of employees may also be eligible to join.
• Self managed super funds (SMSFs) - most individuals are eligible to establish their own SMSF, but an SMSF can only have up to four members in total. Each member must be an individual trustee or a director of the corporate trustee of the SMSF.

Does the super fund provide, or at least offer, insurance cover?

Death cover (including terminal illness cover), total and permanent disablement cover and salary continuance cover are all available through superannuation.

If insurance is one of your needs, you should investigate how you can obtain the required cover and any terms and conditions which will apply, including those relating to any pre-existing condition(s) you may have.

While super funds generally offer their members insurance cover within the fund, please note the following:

• Insurance cover can only be provided automatically if you’re 25 or over and have a super balance of $6,000 unless you request cover.
• Your insurance may be automatically cancelled if your account has been ‘inactive’ (i.e. no contributions or rollover) for a continuous 16-month period and you have not elected to maintain your insurance cover. 

What investment options are offered?

Superannuation funds generally offer different investment options for growing your money. Some investment options are conservative, being primarily invested in cash and fixed income, usually for investment over the short-medium period. These options may be best suited to those nearing retirement. Some investment options are growth-oriented, investing primarily in a mix of shares and property and are generally suited to investment over a long term, e.g. for a young person entering the workforce.

It’s important to think about how much risk you are prepared to take on with regard to your investments; this may be primarily driven by your time-frame for investment. Be sure to learn about the different investment options available for your preferred investment time-frame, and the investment approaches and underlying fund managers used, to help determine which option(s) may suit you best.

How has the fund performed as expected?

A superannuation fund may have many underlying investment options, each with varying investment performance.

The performance of an investment option should be assessed in light of the option’s benchmark and standard risk measure. The performance of the investment option could also be compared with that of investment options with similar investment strategies to determine how it ranks against its peers.

It may also be useful to consider the fun's long-term investment track record, though past performance is not reliable indicator of future performance.

What fees does the fund charge?

Typical fees charged by a super fund may include administration fees, investment fees, and insurance fees (including insurance premiums).

You may need to ask the following questions before deciding on a super fund. What fees does the fund charge? How are they calculated and when are they charged? Are the fees competitive?

It’s also important to remember that while administration fees may seem small at first - as the balance in your super account grows, they may become more significant, for example if they are calculated as a percentage of your superannuation balance. Check how administration fees are charged and how the fee amount may change as your super balance grows.

Can the fund help ‘find my super’?

Some funds will conduct a superannuation search to help you track down any lost superannuation you may have, on your behalf.

Can the fund meet my future needs?

You may wish to choose a super fund that can meet your current needs and anticipated future needs. A super fund which can pay an income stream from your super once you become are eligible, e.g. at preservation age, or later upon retirement, could be considered.

Does the fund offer an appropriate level of customer service?

There are several other factors that may come into play when choosing a superannuation fund. You might want to consider, for instance, if your fund offers online access, branch support, superannuation calculators, or superannuation rollover assistance.

Think about how important the service factor is to you. Do you need to have a real person available to answer your questions, or are you happy managing your superannuation online?

Does the fund include value-add services?

There are several other factors that may come into play when choosing a superannuation fund. You might want to consider, for instance, if your fund offers online access, branch support, superannuation calculators, or superannuation rollover assistance.