Choosing the suitable super fund

Choosing the suitable super fund

If you want to have a long, happy, and comfortable life in your retirement, you will have to pick the right fund. On the other hand, you might suffer pain for a long time if you choose the wrong kind of fund.

What are some of the considerations?

A right fund is the one that caters for your needs. There are usually different ways and factors that one can consider.

Since you know that selecting the right super fund can make a difference during the retirement time, it is crucial to understand the super fund you are looking for.

Here are some of the important considerations when you want to choose a suitable super fund

  1. Types of superfunds

Make sure to choose the right type of fund. Not all the superannuation funds that you find in the market are made in the same way. Different rules and regulations usually govern different types of funds. Here is a brief description of some of the funds:

  1. Corporate fund: an employer normally creates this kind of fund to benefits employees. Only the people who work for the company or employer are eligible to join the fund.
  2. Industry funds: this kind of fund is established to cater to the retirement needs of workers of a particular industry. Industry super funds have no shareholders but are membership-based.
  3. Retail fund: to generate corporate profits, insurance companies, banks, and Corporations, usually use retail super funds. Shareholders will subsequently receive the profits as dividends. Most of the large retail super funds around are typically owned by big banks.
  4. Public sector fund: are often profit-to-member funds that are open for government employees to join. In public sector funds, many long-term members usually have defined benefits, while the new members typically prefer to hold accumulation funds.
  5. Self-managed super fund (SMSF): it is a private superannuation fund which an individual manages and Australian Taxation Office regulates. SMSF members also act as the trustees of the fund. Even though the members have to comply with the super and tax laws, they usually run the SMSF for their own benefit.

2. Super fees and costs

Super funds are usually charged either less or more fees. If the same assets are invested, low fees and costs will make your super develop faster. In order to choose a super fund, you will have to weigh up fees and costs against other parameters like returns, risks, and services provided.

Types of fees and costs super funds can charge

The fees associated with super funds are different. Super fees which are usually deducted either at the end of the month or when a certain transaction occurs, are typically charged either as a percentage or dollar amount.

The following are the types of fees you might encounter:

  • Administration fees – these are costs that a fund incurs to keep your super account operational.
  • Investment fees – managing your investments usually involve certain costs. These will vary according to the investment options.
  • Indirect costs – super funds usually pay some costs to external providers affecting your investment value.
  • Advice fees – advice on issues relating to super and other investments is charged a fee. For the investments that the super fund does not entail in product disclosure statements (PDS), your adviser will have to receive fees and commissions.
  • Activity-based fees – it is only when the superannuation provides a particular service that this kind of fees are charged- for instance, family law split fee.
  • Insurance premiums – the insurance cost depends on the default insurance option that your super fund provides.

3. Insurance

It is usually wise to check the available cover and how much it costs when selecting a super fund. Many industry funds typically like to provide income protection, life, and total and permanent disability insurance.

When choosing or changing between funds, know that you might not find insurance offered in low-fee funds. You stand to benefit a lot if you implement insurance in your super fund. One can get lower premiums from a larger super fund since it has a group that entails a lot of members. Premiums are tax-deductible from the fund when an individual uses the super fund to pay insurance instead of post-tax income. It is only the income protection insurance that is an insurance which is tax-deductible outside of super.

4. Investment options

A suitable super fund should allow you to select the investments opportunities that have minimal risks and cater to your personal preferences. The funds you will access during retirement will depend on the investment decisions you make. In order to adequately match the asset allocation and risk profile needs, the super fund should provide a minimum of five options.

Control over your investment strategy and investment portfolio will determine the level of choice required.

5. Investment performance

Performance of a particular investment is crucial, but you cannot depend on historical performance as an indicator of what the future performance will turn out. In a short period, funds can rise and fall – especially when the periods you are looking at are one to three years. Sometimes, super funds’ investments can be highly risky and be able to give high returns in the short periods, but that may not be evident in the long-term. When operating a super fund, you aim to grow your money over longer periods.

To be on the safe side, the basis for comparing funds should be the performance figures of at least five years. When comparing funds, make sure they have asset allocations, objectives, and time period. Calculations and performance information is usually given in each super fund available. Performance should not be looked in isolation; other factors such as investment options, insurance benefits, and fees should be taken into account.

6. Super services

Most super funds around usually provide special services such as investment advice or financial planning. So, research your superannuation fund and find out if the services it provides aligns with your goals and needs. In case you don’t need certain services, you don’t have to pay for them. Super funds will generally offer services such as employee online reporting, member newsletters, education services, and client service centre and member website.

All Superfund websites usually provide essential information about the fund, such as:

  • Insurance cover information
  • Up-to-date performance data
  • All investments’ consolidated asset allocation
  • Transactions details and your account charges.
  • Basic investments values and investment choices information.
  • Your current balance


7. Seeking financial advice

Choosing the right super fund involves weighing out various elements. Do careful research and analyse the above features for every fund.

Before settling on a particular fund or deciding to change your account, you need to engage a licensed financial adviser to provide you with the independent financial advice. Financial advice will help you make the correct decisions in a complex superannuation environment.

The above article is information only and mot advice.