How to choose a super fund

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

While the ability to choose super funds has given workers a certain degree of power, the actual choice of a fund can sometimes feel rather overwhelming, especially with a large number of products from both retail and industry funds vying for consumers’ investment dollars.

There are many superannuation funds—and thousands of superannuation investment options—to choose from in Australia. When choosing a super fund, we’d recommend you compare your options based on factors that are important to you. So when assessing a super fund, you should consider questions like:

• Does the super fund have competitive fees?

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

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

• What insurance options does the superannuation fund offer?

• What other services does the superannuation fund offer?

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

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. The hypothetical examples in the table below illustrate how this could work.

Effect of Fees On Superannuation Balance at Retirement

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Source: www.canstar.com.au. Prepared on 14/04/2025. Scenario begins at the start of the 2024-25 financial year and is based on a 25 year old with a starting balance of $24,449 (per APRA Quarterly Superannuation Industry Publication, Dec-24), starting gross annual income of $83,200 (per ABS Characteristics of Employment – median full-time employee earnings, Aug-24), and retiring at age 67. SG Contribution amounts per Government announced rates, and along with the salary sacrifice and monthly after-tax amounts, are assumed to be paid into superannuation fund quarterly. Employer contributions are assumed to be taxed at 15%. Gross investment returns assumed to be 6.4% p.a. based on the 10-year average annualised rate of return per APRA Annual Superannuation Bulletin (Jun-24). Average life and TPD insurance premium of $171, is assumed charged at the end of each year based on default cover available for a 25 year old on Canstar’s database. Annual income and insurance premiums are assumed to increase with inflation each year. Inflation is assumed to be 2.5%p.a. due to the rising cost of living (CPI Inflation) plus a further 1.5%p.a. due to the rising community living standards. End balances at retirement and total salary sacrifice amounts are shown in “today’s dollars”, i.e. they have been adjusted for inflation. End balances at retirement are also rounded to the nearest $100. Please note all information on income and superannuation 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 Low Fee Super Funds

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

Superannuation is an investment structure designed to give you a savings nest egg for your retirement. Generally, your super fund will give you options for how your money is invested. These options or ‘approaches’ are often categorised as growth, balanced, conservative, cash and ethical.

• Growth — generally made up of a higher percentage of shares and property, rather than fixed interest or cash. This approach aims for higher than average returns over the long term, but is heavily impacted by the performance of both the share and property markets.

• Balanced — as the name suggests, this approach often takes on more fixed interest and cash assets, still with a focus on shares and property. It aims for reasonable returns, less than growth options, but with a reduced risk of losses when the share and property markets are down.

• Conservative — predominately made up of fixed interest and cash assets, a conservative approach aims to reduce the risk of losses, but typically delivers lower returns.

• Cash — an investment approach that usually puts 100% of its deposits into Australian deposit-taking institutions (banks and other financial institutions) or into a ‘capital guaranteed’ life insurance policy. This approach aims to guarantee your investment and accumulate earnings through interest, meaning there are no risks of losses.

• Ethical — this option avoids investing in companies that don’t meet certain social, environmental and/or governance standards. This approach can deliver anywhere from high growth to conservative returns.

Consider professional financial or superannuation advice on what investment approaches 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?

Being a long-term investment, a superannuation fund’s performance is one of the most crucial factors to consider when choosing one. Small differences in performance can make a big difference to your retirement balance. 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.

The hypothetical examples in the table below highlight the significant effect that even a 1% or 2% difference in annual performance could have on a person’s super account by retirement.

Effect of Annual Returns On Superannuation Balance at Retirement

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Source: www.canstar.com.au. Prepared on 14/04/2025. Scenario begins at the start of the 2024-25 financial year and is based on a 25 year old with a starting balance of $24,449 (per APRA Quarterly Superannuation Industry Publication, Dec-24), starting gross annual income of $83,200 (per ABS Characteristics of Employment – median full-time employee earnings, Aug-24), and retiring at age 67. SG Contribution amounts per Government announced rates, and along with the salary sacrifice and monthly after-tax amounts, are assumed to be paid into superannuation fund quarterly. Employer contributions are assumed to be taxed at 15%. Average life and TPD insurance premium of $171, is assumed charged at the end of each year based on default cover available for a 25 year old on Canstar’s database. Annual income and insurance premiums are assumed to increase with inflation each year. Inflation is assumed to be 2.5%p.a. due to the rising cost of living (CPI Inflation) plus a further 1.5%p.a. due to the rising community living standards. End balances at retirement and total salary sacrifice amounts are shown in “today’s dollars”, i.e. they have been adjusted for inflation. End balances at retirement are also rounded to the nearest $100. Please note all information on income and superannuation 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. It’s also worth noting that the level of default cover may be limited should you need to make a claim in the future, and exclusions can apply. It’s best to check the Product Disclosure Statement (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 or diagnosis with a terminal illness.

• Total and permanent disability (TPD) insurance — pays you a lump sum if you become totally and permanently disabled. The definition of total and permanent disability varies between insurance providers but it typically means that you’re disabled to the extent that you will be unable to work again, either in your current job or in any job you’re qualified for.

• Income protection insurance — insures you for a set proportion of your income for a certain length of time in the event that you cannot work temporarily due to illness or injury.

Life insurance, total and permanent disability insurance and income protection insurance options can be compared with Canstar.

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What other services does the superannuation fund offer?

There are a number of other services and features super funds may offer, so it could be worth thinking about which ones are most important to you. For example, 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 advice, or online superannuation calculators?

Consider making a checklist of what services you are looking for and ask your fund whether it provides them. Keep in mind, 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 table.

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