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What is a default super fund?
Knowing the ins and outs of how an employer default super fund works could be important when it comes to maximising your retirement nest egg, or rebuilding it if you have recently withdrawn funds.
23 July 2024
Knowing the ins and outs of how an employer default super fund works could be important when it comes to maximising your retirement nest egg, or rebuilding it if you have recently withdrawn funds.
Key points:
- If you don’t have a preferred fund or choose not to nominate one, an account will be created on your behalf with your employer’s chosen default super fund
- Every employer is obliged to make super guarantee payments – or contributions – on behalf of eligible employees
- If your super is currently held with a default fund, you can apply to have your super transferred to a fund of your choice.
Whenever you start a job, your new employer will usually give you a superannuation fund nomination form to fill out. This form allows you to nominate which fund your employer should pay your super contributions into.
You might nominate a super fund you have already been contributing into. Otherwise, if it’s your first job, or you want to choose a new fund for yourself, you may decide to do some research, compare funds and decide on a specific fund you want your super contributions from your new employer paid into.
But if you either don’t have a preferred fund or simply choose not to nominate one, an account will be created on your behalf with your employer’s chosen default super fund.
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What is a default super fund?
A default super fund, also known as an employer-nominated fund, is the superannuation fund into which your employer will make your super contributions if you do not nominate a fund of your own choosing.
According to the Australian Taxation Office (ATO) rules, every employer is obliged to make super guarantee payments – or contributions – on behalf of eligible employees, and the default fund (also called a MySuper product) is where those payments will go unless an employee has nominated a super fund.
According to the Australian Government’s Moneysmart website, default super funds are intended to be simple, low-fee options, where an individual’s super is usually put to work in either a ‘single diversified’ or ‘lifecycle’ investment option.
An employer can select any industry or retail super fund as their default fund, but whatever your employer nominated super fund happens to be, their fund of choice must offer a MySuper account.
The upshot of all this is that, for employees who do not take an active interest in their super, the MySuper system is designed to help make sure that the employer’s default superannuation fund will be an appropriate place for their retirement savings.
But there can be a significant difference in the performance of these funds, so it can be worth doing your research before joining one and leaving the super fund nominated by your employer. The ATO offers a YourSuper comparison tool which:
- displays a table of MySuper products ranked by fees and net returns (updated quarterly)
- allows you to select and compare in more detail up to 4 MySuper products at a time
- links you to a super fund’s website when you select a MySuper product from the table
- can show your current super accounts alongside other MySuper products, if you access the personalised version through myGov
- provides links to help you consolidate your super accounts.
The information displayed in the comparison tool is collated and supplied by the Australian Prudential Regulation Authority (APRA).
Canstar’s experts rate the super funds on its database based on a range of factors to help consumers find a product that suits them.
Can I transfer my super to a different fund?
If your super is currently held with a default fund, you can apply to switch and have your super transferred to a fund of your choice.
According to Moneysmart you can do this easily online through the ATO:
- go to my.gov.au
- log in or create an account
- link your myGov account to the ATO
- select ‘Super’ and then ‘Manage’
- select ‘Transfer super’ (this option will only appear if you have more than one super account).
You can ask your new super fund to consolidate the funds for you, or you can lodge a paper form with the fund you wish to transfer your super from – this rollover initiation request is to transfer the whole balance of superannuation benefits between funds.
But remember, it’s important to weigh up the pros and cons of transferring your super to a new account.
When looking for the right fund for your retirement savings, there are a lot of factors to consider, including the fees charged, the insurance on offer through the fund and the education and advice that’s available to members.
The investment performance of the fund is also important to think about, but because investments can go up and down over time, a fund’s performance in the past shouldn’t be relied on as an indication of its likely future performance.
If you want to see if there’s a super fund that may be suited to your needs, you can compare your options with Canstar.
Compare Superannuation with Canstar
The table below displays some of the superannuation funds currently available on Canstar’s database for Australians aged 30 to 39 with a super balance of up to $55,000. The results shown are sorted by Star Rating (highest to lowest) and then by 5 year return (highest to lowest). Performance figures shown reflect net investment performance, i.e. net of investment tax, investment management fees and the applicable administration fees based on an account balance of $50,000. To learn more about performance information, click here. Consider the Target Market Determination (TMD) before making a purchase decision. Contact the product issuer directly for a copy of the TMD. Use Canstar’s superannuation comparison selector to view a wider range of super funds. Canstar may earn a fee for referrals.
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Main image: M Isolation photo/Shutterstock.com
This article was reviewed by our Editor-in-Chief Nina Rinella before it was updated, as part of our fact-checking process.
Try our Superannuation comparison tool to instantly compare Canstar expert rated options.
