Why would you open a super account?
Some of the most common reasons for opening a new super account include:
Starting a new job
Most people get their first super account when they start their first ‘real’ job. By law, your employer needs to pay at least 9.5% of your ordinary time earnings into a complying super fund on your behalf once you earn more than $450 per month before tax. Many people also just tick the box on the form when they start a new job to open a super account with the fund their employer recommends. This can be the easiest option for many people, but it means you could end up with a super fund that isn’t the best choice for you.
→ Related article: Default super funds
Over time, you may also end up with multiple super accounts with different funds as you move to new jobs. This could result in you paying more than one set of fees, and potentially premiums for multiple insurance policies through different funds. Plus, it can make it tricky to keep track of how much money you have in each super account, monitor your changing balances, and be aware of what tools and services you could be using through each fund.
Productivity Commission and Banking Royal Commission recommendations could lead to changes to how those starting their first job are ‘defaulted’ into a super fund. In the meantime, it could be worth considering your options before ticking the box.
Leaving a corporate fund
Some employers have a dedicated super fund or a corporate plan within a broader fund that is only available to employees. So if you leave your job, your new employer may not be able to pay your super into your existing super account.
If your old employer’s super plan is within a broader fund, your account may be able to roll into a new account with that same fund. If this is the case, be careful about the costs for administration and insurance of that new account. They can be greatly different to the costs of your corporate arrangement. But if your old job uses a dedicated employees-only super fund, you may need to open another account with a new super fund when you start a new job.
Bear in mind that some corporate or public sector super funds may offer different features to other funds available in the market, so it could be worth considering what features are right for you before deciding whether or not to consolidate your super.
Choosing lower fees
The admin and investment fees super funds charge vary. So it can pay to compare your super fund’s fees to those charged by other funds. All super funds need to charge fees to cover the costs of administering your super account and investing your balance, and providing you with services like general advice – whether given over the phone or in virtual real-time chats – as well as online tools and information.
However, some funds charge lower fees than others, and every dollar in extra fees you pay means a dollar less that is invested and growing for your retirement. If your current super fund’s fees are significantly above those of other funds, you might want to weigh this up against the returns and other features you are getting, and consider a super swap to a lower cost option if you’re not satisfied overall.
→ Related article: What fees do Australian super funds charge?
Seeking better investment performance
All super funds offer a range of investment options that can range from single asset classes like Australian shares or cash, through to options that contain a mix of different assets and come with varying degrees of risk. For instance, ‘growth’ options might contain 70-75% assets such as shares and property; while ‘conservative’ options might only contain 25-30% of such growth assets, with more weighting to safer assets like fixed interest and cash.
Because of the different mixes of assets that are on offer across a range of investment options in different funds, as well as other factors like the different investment strategies and skills of their respective investment managers, super funds’ investment performance can vary.
Just like fees, it can pay to compare your super fund’s investment performance to other funds, and choose a different fund if you determine that your current fund’s long-term performance is falling behind that of other funds. Remember, though, that depending on how long you have until retirement, it could be a good idea to focus on your funds’ long-term performance over five, seven or even 10 years.
How do you open a super account?
There are different ways you can open a super account – whether this is through your new employer by default, online, or through your bank. If you don’t tell a new employer what your chosen super fund is, they will typically open a super account with their preferred fund on your behalf. You may like to consider some of the potential benefits of choosing your own super fund when you start a new job.
Open an account online
Most super funds have an easy online joining process. If you’ve decided to open an account with a new fund, it’s often as easy as searching for the online join tool on their website and following the tool’s prompts.
If you can, have your tax file number (TFN) handy. If you don’t have a TFN yet, the Australian Taxation Office (ATO) has advice on applying for a TFN you may find helpful. Letting your super fund know your TFN means they can accept your super contributions and charge the appropriate tax rates that generally apply to super contributions. Providing your TFN will also allow your super fund to search for any other super accounts you may have and ask you if you want to consolidate them into your new account. Don’t worry if you don’t have your TFN handy – you can still open a super account and provide your TFN at a later date.
Open an account through your bank
You may have been prompted by your bank – in person or online – to open a super account with them. Like going with a new employer’s super fund, this might be an easy option for some people. It will also let you see your super account balance at the same time you check your bank account. But don’t forget – most (if not all) super funds offer easy online access to view your super account, often through a smartphone app.
You should also consider comparing your bank’s super fund to those of other super providers on the market before committing one way or another. This can be an important step, because the fees charged, the services and features offered, as well as the investment performance achieved, can sometimes vary significantly between different funds.
How do you consolidate your super, if you want to?
If you have many super accounts and have chosen a fund you want to use as a main account, the Australian Taxation Office (ATO) or your superannuation provider can generally help you find lost superannuation, and consolidate your super accounts.
Some super funds will let you instantly search for your other super accounts through their website and step you through consolidating them into your chosen main account. Having the details of your other super accounts to hand can make consolidating them easier. As an alternative to asking your super fund to consolidate funds for you, you can consider using the myGov portal. The ATO also offers a form which you can fill out and send to either your old fund or your new one, to request that your money be rolled over. There are two forms on the ATO’s website. One is for standard superannuation funds and the other is for self-managed super funds (SMSF).
→ Related article: Super swap: How do you change superannuation funds?
What should you consider before opening a new super account?
MoneySmart recommends comparing features such as performance, fees, insurance, investment options and services in comparing super funds. Your personal circumstances, such as whether you are self-employed, are important to consider. Before opening a new super fund, be sure to check any insurance cover – such as life insurance – you may have through your current super fund and satisfy yourself that you’ll have enough cover (for example, from your new super account or any standalone policies you may have) if you close this super account and lose this cover. Once you open a new super account or choose one of your existing accounts as your main fund, let your employer know so they can pay contributions to your chosen account, and do the same for new employers if you change jobs in the future.
Don’t forget, your super is your future money. Just like choosing a lender for your home loan or a private health fund for your health insurance, it could pay to shop around and make sure your super fund is looking after your future money and helping make sure you can live out your retirement dreams.
If you’re comparing Superannuation funds, the comparison table below displays some of the products currently available on Canstar’s database for Australians aged 30-39 with a balance of up to $55,000, sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Use Canstar’s superannuation comparison selector to view a wider range of super funds.
Fee, performance and asset allocation information shown in the table above have been determined according to the investment profile in the Canstar Superannuation Star Ratings methodology that matches the age group you selected.
Canstar note: Consolidating super funds is beneficial for many people but isn’t right for everyone, so the pros and cons should be carefully weighed up. When seeking the right fund for you there are many factors to consider, such as the fees charged, whether the insurance offering is suitable for you and the education and advice available. Past performance is an important consideration because it gives an indication of what a fund has been capable of delivering in the past through varied market conditions. However, investments can go up and down, so past performance is not necessarily indicative of future performance. Changing super funds may affect your financial future, so you may also want to consider seeking professional financial advice.
Evan Poole is Sunsuper’s Advice Operations Manager. He has more than 20 years’ experience in financial advice.
Main image source: Watchara Ritjan (Shutterstock)