As account-based pensions (a.k.a. allocated pensions) are fast becoming the primary source of income for retiring Australian workers, it’s more important than ever to understand how funds differ and what to look for in a fund. Kicking the tyres of a fund (metaphorically, of course) is not too difficult once you know what you’re looking for.
There are a wide variety of superannuation funds registered in Australia, and approximately 111 of these are public offer entities – funds that anyone can apply to join (APRA, 2015). Many super funds offer an account-based pension product, so how do you find the one that’s best for you?
Every year, CANSTAR undertakes an extensive research and analysis task to rate account-based pension products according to our star ratings methodology. If a fund’s product meets our eligibility requirements, we assess the product based on its pricing and features.
In 2016, we rated 64 account-based pension products available from 58 providers. We asked each fund about nearly 200 of their product’s features. These features included the available investment options, income payment options, availability of advice and beneficiary options.
Retirement needs and financial strategies will vary from person to person depending on their financial position, so to account for this, CANSTAR rates account-based pensions for three different investor profiles. These profiles are based on the account balance your account-based pension would have to provide for:
- Low Balance: $0 – $250,000 (We rate a $100,000 balance)
- Medium Balance: $250,000 – $550,000 (We rate a $400,000 balance)
- High Balance: $550,000 and over (We rate a $750,000 balance)
Whether a product is good value for different profiles is determined by putting different weight on certain price and features options depending on the profile. You can read more about the price and feature weightings in the methodology document for this report.
Eligibility requirements for account-based pensions
Products must meet the following selection criteria in order to be considered for the CANSTAR star ratings:
- The provider or parent company must have a minimum of $100 million in funds under management. (Superannuation and pensions may be combined for this purpose.)
- The fund must be Retail or Industry open public offer. (Corporate and closed products are excluded.)
- The fund must be directly available to individuals without an intermediary such as a financial planner.
- Not a wrap-only product.
- Not an annuity.
- Not a TAP (Term Allocated Pension). These can only be commenced with the proceeds of another TAP or complying pension/income stream originally started prior to 20 September 2007.
For the purposes of our ratings, the fund must also offer an investment option with a 60-80% growth asset allocation. Preferably this would be the default investment option.
Features we look for
The ideal mix comes when you find a fund that is easy to join and provides:
- Low fees
- A wide range of investment options
- Competitive long-term performance
- Multiple options for income payments
- Transition-to-retirement (TTR) options if you’re still working
- Online access to your pension account so you can make changes easily
Below are the main features we look at when assessing the account-based pension offering of each fund:
|Financial Advice & Education|
|General Advice Tools & Education||Does the fund offer education and advice seminars, or offsite seminars or visits?
Does the fund provide education and advice newsletters, an insurance/retirement/TTR calculator on the website, investment risk profiler on the website, video tutorials, case studies, and a glossary?
|Scaled or Limited Advice||Is scaled or limited advice available?
Is it available over the phone, with f2f, or through an external referral partner?
Is a fee charged for advice?
How many members are allocated per adviser for scaled advice?
|Comprehensive Advice||Is comprehensive investment advice available?
Is it available over the phone, face to face, or through an external referral partner?
What is the maximum fee charged, and can this fee be paid from your super balance?
Is it an own or operated financial planning channel?
Does the fund have a licence for credit or SMSF advice?
How many members are allocated per comprehensive adviser?
|Managed Funds||What managed fund options are offered? For example:
· Investment across multiple options allowed (excluding cash)
· Pre-mixed options (conservative, balanced, growth)
· Sector funds (Australian or international shares, Australian or international or unlisted Australian property)
· Australian or international fixed interest
· Index funds
· Emerging market funds
|Listed Securities||What securities are available for trading? For example:
· ASX All Ords
· International exchanges
· Other listed securities (e.g. CFDs, warrants)
What is the quote time lag?
|Term Deposits||What are the term deposit sector or managed fund options?
Are term deposits available for a term of 30 days, 90 days, 180 days, 1 year, 3 years, or 5 years?
|Online Access||Look for availability of: statements, investment returns, investment reports, mobile phone app, and a website optimised for mobile phones.
Look for ability to: check account balance (frequency of updates), update details, place investment switch, request withdrawals, and change payment frequency or amount online.
|Phone Access||What are the fund’s call centre operating days and hours?
Look for ability to: check balance, update details, place investment switch, request withdrawals, and change payment frequency or amount over the phone.
|Account Set-Up||What is the minimum amount required to open an account?
Are online account set-up and consolidation available?
Is an accumulation account also available? Can you auto-rollover from an accumulation account?
Beneficiary Options & Death Benefit
|What are the beneficiary nomination types (binding, non-binding, reversionary beneficiary)?
Are anti-detriment payments available?
Is a funeral payout offered?
|Income Payment Options||What is the regularity of income payments (e.g. weekly, fortnightly, monthly, semi-annually)?
Look for ability to: alter payment frequency after set-up, automatically pay minimum mandatory drawdown, nominate any bank account for income payments.
Is there a lump sum withdrawal fee?
|Other Fees and Charges||Is there a fee for: initial contribution, lump sum withdrawal, termination, binding nomination.
Is there a fee to switch investment options? How many free switches can you make between investment options?
Sorting “average” from “outstanding”
In 2016, CANSTAR has researched and rated 64 account based pension products from 58 different providers. Our research shows which accounts reward you with outstanding value for your retirement income stream.
Take a look at our star ratings and you’ll soon see how variations in the price or features offered make a difference to the value a fund can provide. Don’t settle for less than outstanding value when it comes to the pension providing for your retirement.