How to choose the right Australian super fund

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Choosing the right super fund can be a bit of a headache. Though often we don’t actively choose a superfund for ourselves, its automatically set up with our employer. However, it’s an incredibly important financial decision that you should definitely be involved in. That’s because the type of superannuation fund you choose, could mean the difference between hundreds of thousands of dollars in your retirement fund.  So, where do you start? And how exactly do you choose the right Australian super fund?

Well, that’s why we’ve written this blog. To help you answer those questions, so that you can choose your right super fund with confidence.

What is superannuation?

An Australian super fund is a retirement fund that allows Australians to save up money for their retirement. They are types of investment funds that provide you with money for when you retire. The fund is looked after by an investment manager, which can’t be accessed it until after you are retired. Your employer will pay a percentage of your income into your Australian super fund – usually be around 10%. These funds accumulate over the years, and build up value through compound interest made on your investments.

Why are they important?

Your Australian super fund is important because it is your savings that is going to support you in your retirement. Thus, it’s also important to keep a track of your superannuation fund.  That way you know what your accounts are and how much is being contributed into them.

Some people may have even lost super if they have ever worked overseas, changed their employment, address or name.

How to find my superannuation fund?

Many people ask this question, and wonder exactly how much they have in their account for retirement. Though knowing where to start might seem difficult. However, finding your superannuation fund, is quite simple. The best way to find your super fund is to create a myGov account online, and link it to the Australian Taxation Office (ATO) service. Here is allows you to see all your super accounts. It will also help you track down any lost super you may have.

How to find lost superannuation money?

Finding any lost super money, you may have, can easily be done through the ATO.  You can check if you have any lost super through your my Gov account. Alternatively, you can check it with AUSfund which is a fund that holds any super that has been unclaimed.

How to choose a superannuation fund?

Most people get an Australian super fund through their employer. Otherwise you can choose your own super fund. This means it is up to you to choose which super fund you want to go with. But how exactly do you make the choice? Here is a list of the top things to consider when choosing a super fund:

Look for lower fees

super funds that charge lower fees and have lower rates could end up saving you thousands in the long run. The fees you should look at are the annual percentage fees.

What investment options do they offer

the superannuation fund holds within it, several investment options. The fund could be composed of varying investments. They may include cash, bonds, property, shares, and could be a mixture of these different assets.

Check to see if the super fund has a good performance track record

comparing super funds who have don well in last 5 years is a good indicator that they have been doing well as in investment fund. Though it isn’t a guarantee for future performance.

See what insurance policies the fund offers

the selection of insurance policies included in your superfund may also influence your decision. Some insurance policies that might be included are life insurance policies. These would pay a lump sum of money to your beneficiaries upon your death. Another type of insurance policy could be total and permanent disability insurance. This would pay you a lump sum in case you were to become totally and permanently disabled. Finally, your superannuation fund could include income protection insurance. This would insure you if you were to become ill or have an injury which meant you were unable to work for a certain period.

What other services do they offer

doing a bit of research on the super company you are interested in will allow you to see what services they offer. Some of these services might include: being able to transfer funds from your Australian super into your account, or being able to access your account details online. Other services might include, whether you are able to easily make extra contributions to your Australian super fund. Or perhaps it might offer financial advice.

How do I compare Australian super funds?

As well as looking at the above factors of each super funds there are some websites that allow you to compare different superfunds that are out there. Basically, they do the comparing for you, by showing you the details of each fund. The following is a list of places that compare superannuation funds for you:

These websites specifically show what Australian superannuation rate each company has. However, this is not the only piece of information that should determine your decision about which Australian super fund to choose.

What if I want to change my Australian super fund?

Now that you know a bit more about how to choose a super, you may be thinking that you want to change your current superannuation fund. You may want to change it to get better fees, or to consolidate multiple super accounts into one. Perhaps you want to change to one that offers lower fees, or has a better track record.

To change your Australian super fund, you just need to fill out a rollover form. It will ask you to provide proof of identity. This is just to make sure that your superfund is being transferred by you and not someone else. Though it’s important not to change super funds if it only performed badly the last year. Stick with it for 5 years and then decide if you’re superfund is right for you.

It’s important to note that if you are thinking about making any superannuation changes, your individual situation might play a significant role in helping you to decide the right super for you.

Explaining superannuation, in a bit more detail

Essentially your Australian super fund is an investment fund. It means that as your contributions are made they are invested so that they can grow. Though there are different types of investments that are supposed to be better suited to different life stages of life and financial goals.

The types of investments there are fall under 4 categories which include, cash, bonds, shares and alternatives. Your fund can be a diversified fund which contains a combination of all the above investment options. Though each type of investment has different characteristics which will ultimately influence how you want your Australian super fund to be composed.

Investment types

Cash

Investing in cash is generally an option for those who want to access their superannuation money in the short to medium term. This is because negative returns are generally much lower, but it also means that returns are not as high.

Bonds

On the other hand, you could choose to invest in bonds which are fixed income loans that are offered to governments or large corporations to fund operations, in exchange for a fixed interest rate plus repayment of the principal amount at the maturity date of loan. It’s a great investment option if you are not as fussed about taking risks.

Shares

These give higher returns than cash, bonds or property investments. Though they are not as good in the short term because their performances are more volatile and sometimes negative.

Alternatives

Finally, your Australian superfund can be composed of alternative investments including property or infrastructure. Though property is considered a riskier investment because the market is usually much more volatile, and can give negative returns in the short-term. It is also dependent on the rental income and market demand.

The other option is to invest in infrastructure. Albeit, the barriers to entry are higher, they offer a steady income stream and are less volatile than equities. Normally, they are in government sectors or in sectors that are monopolised by one company, i.e. energy, transport or communications.

How do I measure the risks of the investments my Australian super fund is involved in?

Knowing what to invest in can be a matter of assessing the risks involved in the investments. The way to measure risks can be done by following the guidelines developed by the super industry. They have developed a standard risk measure (SRM) which helps you to compare different investment options by looking at the risks involved with each one.

The risk bands are numbered from 1 to 7 with the higher the number being the riskier the investment. It is based on the number of negative annual returns you will receive over a period of 20 years.

What are the tax benefits of having an Australian super fund?

This is something else that you may not know about Australian super – it can give you tax benefits. After you turn 60, your super withdrawals are tax-free. If you withdraw before you are 60 you will be taxed on your withdrawals.

But there are some tax benefits you can take advantage of now. By making your own voluntary contributions to your Australian super fund. You either do this making before-tax contributions by salary sacrificing through your employer or you can make after tax contributions from your take home pay.

You may be wondering whether you pay tax on super. Well, you do, but it’s usually at a lower rate than your income tax – therefore making extra super contributions can save you on paying taxes.

What are the tax rates on superannuation funds?

The rates that you will be taxed on your super contributions will depend on the type of contribution.

Employer contributions – 15%

Salary sacrifice – 15%

Voluntary after-tax contributions – No tax

Government contributions – No tax

Transferring or consolidating super – No tax

Superfund investment earnings – No tax

Earning more than $300,000 in income and super contributions per year – 30%

Withdrawing super from 60 or above – No tax

What is a self-managed superannuation fund?

This is a type of super fund that allows the person to have more control over it. However, it’s important to do your research first before entering this type of super fund. It means that if things were to go wrong you could be left in a bad position in retirement. Research also shows that there is a direct relationship on the size of your self-managed superannuation fund and the return on the assets that you receive from it. This means that the lower the fund the less you will gain.

Before you get a SMSF you will need to have a starting balance of at least $200,000 and will also need to ensure that you are able to dedicate enough time to it per week.

At the end of the day, choosing a super fund is a very important decision because it will have a strong impact on your livelihood when you retire. Though knowing where to start can seem daunting. That’s okay, you’re here for a reason and you’ve obviously decided that you want to take an active role in choosing your Australian super fund.

Check out or 10 essential retirement life-hacks here!

As you can see, it’s not as scary as you think. It’s just a matter of taking the time to learn some of the facts about superannuation funds so you know how it all works. You may even want to choose a self-managed superannuation fund if you would like to have more direct control over it. Nevertheless, this is a risky option and is always worth getting some advice first. In fact, you can get free advice through the ATO about superfunds. Doing a bit of research will help put you in a good position to understand superannuation and eventually make the right financial decision for yourself.