How to choose a super fund

Many Australian workers can choose the superannuation fund into which their super contributions are 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 consumers’ 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 that are important to you, which could include 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 0.50% in fees can have on retirement balance

Scenario 1 Scenario 2
Starting age 25 25
Retirement age 67 67
Starting gross annual income* $61,984 $61,984
Starting balance** $25,096 $25,096
Average investment returns 6.85% 6.85%
Fees as a percent of balance 1.00% 1.50%
Average life insurance premium $194 $194
Account balance at retirement $644,557 $557,863
Difference to Scenario 1 retirement balance -$86,694
Source: www.canstar.com.au – 29/01/2021. **Based on a 25-year-old with a starting balance of $25,096 per APRA’s Annual Superannuation Bulletin (25 to 34-year-old age bracket), *starting gross annual income of $61,984, per ABS Median Weekly Earnings of a 25-34 year old, increasing by inflation (projected to be 2.5% each year based on the Reserve Bank’s target of 2%-3%), retiring at age 67. Employer contributions are presumed taxed at 15%. SG contribution amounts per Government-announced rates. Investment returns assumed to be 6.85% p.a. per APRA Annual Superannuation Bulletin average 10-year annualised rate of return. Net performance deducts average fees of 1% p.a. (scenario 1) or 1.5% p.a. (scenario 2) of balance. Average life and TPD insurance premium of $194 is assumed to be charged at the end of each year, based on products in Canstar’s database for those aged 25 years. End balance at retirement amounts are shown in “today’s dollars”, i.e. they have been adjusted for inflation. Please note all information on income, annual superannuation fees and performance returns are used 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. Past performance is not a reliable indicator of future performance.

Compare Super Funds with Canstar

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% earnings can have on retirement balance

Scenario 1 Scenario 2 Scenario 3
Starting age 25 25 25
Retirement age 67 67 67
Starting gross annual income* $61,984 $61,984 $61,984
Starting balance** $25,096 $25,096 $25,096
Annual investment returns 6% 7% 8%
Fees as a percent of balance 1.42% 1.42% 1.42%
Average life insurance premium $194 $194 $194
Account balance at retirement $459,832 $593,501 $845,942
Difference to Scenario 1 retirement balance $133,669 $386,111

Source: www.canstar.com.au – 29/01/2021. **Based on a 25 year old with a starting balance of $25,096 per APRA Annual Superannuation Bulletin, *starting gross annual income of $61,984, per ABS Median Weekly Earnings of a 25-34 year old, increasing by inflation (projected to be 2.5%) each year, retiring at age 67. Employer contributions are presumed taxed at 15%. SG contribution amounts per Government announced rates. Investment returns assumed to be 6%, 7% or 8% p.a. for scenarios 1, 2 and 3 respectively. Net performance deducts average fees of 1.42% p.a., based on products in Canstar’s database for a 25-year-old with a $20,000 balance. Average life and TPD insurance premium of $194 is assumed to be charged at the end of each year, based on products in Canstar’s database for those aged 25 years. End balance at retirement amounts are shown in “today’s dollars”, i.e. they have been adjusted for inflation. Please note all information on income, annual superannuation fees and performance returns are used 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. Past performance is not a reliable indicator of future performance.

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. There are a range of income protection insurance options to compare.

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:

Compare Superannuation Funds

Learn more about Super

Cover image source: ESB Professional/Shutterstock.com

Article originally written by Ellie McLachlan.

It was reviewed by our Sub Editor Tom Letts and Senior Finance Journalist Shay Waraker before it was updated as part of our fact-checking process.

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