Are you entitled to super?
Way back in 1992, the Australian Government could see the burden that paying everyone the age pension when they stop working could have on future government budgets. So they introduced a compulsory super scheme to help Australians save for their own retirement.
Today, if you are an employee and earn more than $450 per month before tax, your employer will more than likely have to pay at least 9.5% of your earnings into a complying super fund on your behalf. The only catch is that you generally can’t access the money until you reach a certain age and (in most cases) retire from working.
What are your super choices when you start a new job?
Currently, you generally have two choices when you start a new job:
- Open a new super account with the super fund your new employer recommends. Your new employer will then pay your super contributions into this new account.
- Tell your new employer to pay your super contributions into an existing super account you already have with another super fund or the super fund of your choice.
For those starting their first job, bear in mind that recent Productivity Commission and banking royal commission recommendations could lead to changes to how you are ‘defaulted’ into a super fund through option 1 above.
What does your new employer need to do about your super?
Your employer will give you a ‘standard choice form’ when you start your new job, most likely with a heap of other documents and forms. By law they have 28 days from your first day to give this form to you. You can also request a standard choice form at any time during your employment, in which case your employer will have 28 days to give it to you.
When you start a new job, the amount of paperwork to fill in and decisions to make about everything from which bank account you want your pay to go into, to whether or not to join the social club can be overwhelming. But it might be a good idea not to just tick the third box on the standard choice form to accept the super fund your employer nominates without taking the time to think about your options first.
Why consider staying with your current super fund?
If you open a new super account with the fund your new employer recommends, your existing super account will remain (unless you combine it with your new account). You’ll then pay fees on both the old and new super accounts. You may also end up paying premiums for insurance cover through both accounts – which you may not need. As the Productivity Commission’s 2018 report into super highlighted, paying annual fees and insurance premiums on multiple super accounts as you move from job to job could mean less money for you when you retire. That said, changes to the super system introduced in 2019 mean there should be less risk of duplicate accounts eating into your retirement savings.
Aside from the extra fees, insurance and potential administration concerns, doing a little pre-new job homework to look into your existing super fund could be a good idea. Super funds can vary considerably in the fees they charge, the returns they earn and the advice and other member services they offer. Before you decide whether you want to stay with your current fund, you may wish to compare the fees and returns of your current super fund to see if you’re happy with them.
How do you stay with your current super fund?
If you want to stay with your current super fund, you just need to let your new employer know.
Many super funds will generate a pre-filled form that you can have emailed to yourself or directly to your new employer that contains all of the fund information and account details your new employer needs.
You can also tell your new employer to pay your super into your existing super account through the standard choice form. You’ll need to know your super fund’s name, ABN, address and phone number, and your tax file number, super account name and membership number. These can be found on the last annual statement you received from your fund or on their website. You will also need to provide a letter from your fund stating they are a complying fund and that they will accept contributions from your employer. You can generally download this letter from your fund’s website too.
How to join your new employer’s designated super fund?
If you decide to go with your employer’s designated super fund, you simply need to advise your new employer you would like your super to be paid into their default fund.
You can do this by selecting ‘The super fund nominated by my employer’ on the standard choice form your employer gives you when you start your new job.
What else should you consider if you join your new employer’s designated super fund?
Most super funds will also provide options for their members, like automatic death and total and permanent disablement insurance, the option to choose an investment option and to make contributions to your super account. If you open a new account, your new super fund should send you some information to tell you about your new options. It is worth reading this and spending some time considering which of these options to take up. Specifically, when considering insurance, it is important to consider whether you already have adequate insurance and whether you need to retain, increase or cancel the insurance cover provided you in this new account.
Don’t forget your super is your bank account for the future
In summary, just like providing your bank details for that all-important salary payment, selecting the right super account for you – whether that’s a fund of your own choosing or your employer’s nominated one – is an important step. After all, when it comes down to it, your super fund is your bank account for your future in retirement.
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.
About Evan Poole
Evan Poole is Sunsuper’s Advice Operations Manager. He has more than 20 years’ experience in financial advice.
Main image source: g-stockstudio (Shutterstock)