There is currently a lot of lost super in Australia, and while some funds hang on to super balances even if the account is inactive or they cannot contact the account holder, some will transfer it to an eligible rollover fund (ERF). ERFs exist to manage small, lost or inactive super balances, or balances that belong to individuals no longer eligible for membership of their original fund.
In the majority of cases, a member’s super balance is transferred to an ERF without them being consulted. Members may also elect to have their balance transferred to an ERF, and sometimes the transfer can work in your favour, at least in the short-term.
Why might I benefit from an ERF?
There are a few reasons you might decide an ERF is the best place for your super balance, at least temporarily.
Many super funds charge various fees in return for holding and investing your money, so if your super balance is low to begin with and you become unemployed (and unable to make super contributions), said fees could end up completely eating away at your balance. ERFs on the other hand, tend not to charge fees because their main purpose is holding balances until they’re reclaimed, without any negative impact on the balance in question.
So if you quit or lose your job and suspect it may take you some time to find another form of employment, an ERF could help to preserve your super balance in the meantime.
If you’ve held a string of jobs within a relatively short period of time, you may have small amounts of super in several different funds. This is not ideal for a few reasons, two of which are:
- Several small amounts earn less compound interest than one big amount does
- Fees (which you will be paying across each account) eat away a greater proportion of small amounts than they do big amounts
For those reasons, it may be to your advantage if the funds holding your super balance(s) decide to send them across to an ERF.
Do ERFs have any downsides?
The main drawback of ERFs derives from their nature as passive funds – your super balance may not be eroded by fees, but ERFs don’t offer a range of investment options for you to choose from, and your balance may not grow nearly as fast as it could if it was with a fund that offered more aggressive investment strategies.
The following table contains details of the superannuation funds rated by Canstar based on someone aged 40-49. This table has been sorted by one-year performance (highest to lowest).
Please note that the performance information shown in the table is for the investment option used by Canstar in rating of the superannuation product.
How many ERFs are there to choose from?
According to APRA, there are currently eight ERFs currently active in Australia:
- AMP Eligible Rollover Fund
- Aon Eligible Rollover Fund
- Australia’s Unclaimed Super Fund
- Australian Eligible Rollover Fund
- SMF Eligible Rollover Fund
- Super Safeguard Fund
- SuperTrace Eligible Rollover Fund
- The Super Money Eligible Rollover Fund (SMERF)
If your super balance is currently in an ERF and you’re looking for a great-value super fund to transfer it into, you can compare super funds with Canstar to help you find one that is best suited to you.