How to choose a super fund

Many Australian workers can choose the superannuation fund into which their super contributions would be made. We take a look at how this process works.

Most people can choose the super fund they want their super contributions paid into by filling out the Australian Taxation Office’s Superannuation standard choice form when they start a new job. This form is generally provided by your employer.

While the choice of superannuation fund initiative gave workers the power, the actual choice of a fund became very complex with a large number of products, including both retail and industry funds, vying for the consumer investment dollars.

There are many superannuation funds – and thousands of superannuation investment options – to choose from. When choosing a super fund, we’d recommend you compare your options based on factors such as competitive fees, strong past-performance, a good combination of investment and insurance options as well as other services, such as easy online roll-over of funds.

So when assessing a super fund, you should ask questions like:

A proactive choice early in your working career has the potential to significantly enhance your retirement nest egg.

5-Star Rated Superannuation Funds

If you’re considering outstanding value superannuation funds,  the table below displays a snapshot of 5-Star Rated superannuation funds on Canstar for Australians aged 30-39, sorted by provider name (alphabetically). Please note the performance information shown in the table is for the investment option used by Canstar in rating the superannuation product. You can see the products most relevant to you by using the tabs to view results for a superannuation balance of $0-$55k, $55k-$100k or $100k-$250k. Use Canstar’s superannuation selector to view a wider range of super funds.

Does the super fund have competitive fees?

Administration and fund management fees can differ widely from fund to fund and from investment option to investment option. While an extra 0.50% per year in fees may not seem very much when your account balance is small, that extra fee margin can add up to a large dollar value as your account balance grows.

Difference 0.5% in Fees can have on Account Balance
Age 25 years old 25 years old
Income $50,000 indexed at 2.5% $50,000 indexed at 2.5%
Superannuation Earnings 5.5% per annum 5.5% per annum
Annual fees 1% of balance 1.5% of balance
Account Balance at age 65 $809,972 $721,093
Source: www.canstar.com.au – 09/04/2020; based on a starting balance of $6,200 for a 15-24 year old, as per ABS statistics. Employer contributions are presumed taxed at 15%. Superannuation guarantee (SG) percentage of income is as per government legislation.  SG contributions are assumed to be made quarterly. Inflation is not accounted for in end balance figures. Please note all information about income, annual superannuation fees and performance returns is for illustration purposes only. Actual returns and the value of your investment may fall as well as rise from year to year; this example does not take such variation into account.

Does the superannuation fund have a good selection of investment options?

Superannuation is an investment structure designed to give you a nest egg of savings for your retirement. It is the underlying investments that you choose to hold within that structure that will determine the performance of your investment. Those investments could range from cash, bonds, property, Australian shares or international shares, or could be a mixture of all these asset classes. Consider professional superannuation advice on what asset classes would suit your situation, and ensure that your superannuation fund of choice has something suitable.

Does the superannuation fund have a good long-term track record?

Superannuation is a structure set up for the purpose of helping Australians save for their retirement. Being a long-term investment, performance is one of the very important factors that you need to consider when choosing a super fund. Small differences in performance can make a big difference to your retirement nest egg. Small differences in fees can also make a big difference, so it’s important to consider both in relation to each other. You may also wish to investigate the performance of ethical investments when you’re considering all of your super options.

While past performance is not a reliable indicator of future performance, a good long-term return will boost your retirement nest egg and even a 1% difference can add up to a lot of money by retirement.

Difference 1% in Superannuation Earnings can have on Account Balance
Age 25 years old 25 years old 25 years old
Income $50,000 indexed at 2.5% $50,000 indexed at 2.5% $50,000 indexed at 2.5%
Superannuation Earnings 4.5% per annum 5.5% per annum 6.5% per annum
Annual fees 1% of balance 1% of balance 1% of balance
Account Balance at age 65 $656,512 $809,972 $1,009,377
Source: www.canstar.com.au – 09/04/2020; based on a starting balance of $6,200 for a 15-24 year old, as per ABS statistics. Employer contributions are presumed taxed at 15%. Superannuation guarantee (SG) percentage of income is as per government legislation.  SG contributions are assumed to be made quarterly. Inflation is not accounted for in end balance figures. Please note all information about income, annual superannuation fees and performance returns is for illustration purposes only. Actual returns and the value of your investment may fall as well as rise from year to year; this example does not take such variation into account.

What insurance options does the superannuation fund offer?

Many superannuation funds offer a level of personal insurance cover and the premiums can be cost-effective for some workers, although it is worth knowing that the level of default cover may be limited should you need to make a claim in the future, and exclusions can apply. It is best to check the PDS and contact your super fund for further details. The types of insurance that may be included in your superannuation fund are:

  • Life insurance – generally provides a lump sum payment to your beneficiaries upon your death.
  • Total and Permanent Disability insurance –  pays you a lump sum if you become totally and permanently disabled.  The definition of total and permanent disability varies between insurance companies but it typically means that you are disabled to the extent that you will probably be unable to work again.
  • Income Protection insurance – insures you for a set level of your income for a certain length of time in the event that you cannot work due to illness or injury. Compare Income Protection Insurance here.

What other services does the superannuation fund offer?

Can you access your account details online? Is it easy to make additional contributions into your account? Does the fund offer the option for personal financial planning advice? Does the fund offer member education, retirement planning, online superannuation calculators… the list goes on.

There is a wealth of other services that may be important to you. Consider making a checklist of what those services are and asking your fund whether it provides them.

Don’t forget: your superannuation is your money. Researching your options and choosing a super fund to suit your needs is worth the effort. You may wish to seek advice from a qualified adviser to help you reach a decision.

To view the past performance of all super funds rated by Canstar, use our comparison tool:

Learn more about Super

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