07/05/2021
Superannuation will become one of the most significant assets that you own – it is for this reason that you are well advised to take an active interest in the fund to which you belong.
Most employees are able to choose their preferred superannuation fund to accumulate their retirement savings – but remember, it’s only an option to choose a fund, so if you’re happy with your existing fund, you can stay put.
Who gets to choose?
The choice of super fund rules do not apply to all employees. You may not be offered choice if you are:
- Paid under a State Award or Industrial Agreement where a particular super fund is specified
- Paid under certain workplace agreements including some Australian Workplace Agreements (AWAs)
- A Federal or State Government employees who is not eligible for choice due to legislation
- Government employees who are members of the CSS or the PSS
- A member of certain defined benefit funds and have reached a certain level of benefit in that fund.
If you are not in one of the above groups it is likely that you can make your own choice of superannuation fund.
The mechanics of choice
As you might expect, there is a process to follow if you wish to choose your preferred superannuation fund – it’s not simply a matter of sending an email to your employer, saying ‘please send my super to the ABC super fund’.
Your employer’s responsibilities
Unless you fall into one of the exceptions outlined above, your employer must offer you the ability to choose your superannuation fund when you start your employment.
A standard choice form must be given to all new employees within 28 days of commencing employment.
The employer will also have chosen a default fund which is used by any employees who don’t want to make a choice or who don’t make a valid choice. The details of the default fund will be written on the choice form that your employer gives to you.
Your responsibilities
Assuming you are eligible, you can complete the standard choice from to advise your employer of your preferred fund. You will need to provide the following details:
- The name of the superannuation fund and your membership details
- The address, Australian Business Number (ABN) and unique superannuation identifier (USI) number of the fund
- A letter from your super fund confirming that it is a complying fund that can accept contributions from your employer
Importantly, if you don’t provide sufficient details to your employer, or the employer is not able to contribute to the fund, your compulsory employer contributions will be made to the default fund.
If you change your mind on which fund you prefer in the future, you can update details with your employer but they may only allow you to make one change in any 12-month period.
Key features – what to look for in a super fund
Superannuation funds offer a range of different features. It is important to compare funds and choose one that best suits your needs. Some of the key aspects to consider when making this choice include:
Insurance cover
For many people, the cheapest access to death, disablement and income protection will be through a superannuation fund. This is because the size of superannuation funds may allow them to obtain group (bulk) cover for members which may convert to lower premiums. The fund may also offer automatic acceptance limits or cover up to a certain limit without asking for medical evidence.
However, differences in premiums and cover levels between superannuation funds can vary significantly and the features may not be as extensive as offers on non-superannuation insurance policies. You need to compare carefully what you get for your money.
Investment options/performance
The range and selection of investment options can vary widely across funds. You need to think about your investment preferences and what sort of flexibility and range you wish to choose from.
Past performance is never a guarantee of future performance. However, sustained poor performance, relative to similar funds, may indicate something is wrong. Of more importance is whether the fund has a robust set of investment objectives and strategies and a well rounded range of investment options.
Fees and charges
When it comes to comparing superannuation funds, this is the aspect that seems to attract most attention – and with good reason, as seemingly small differences in ongoing fees can make a significant impact on returns over time and hence your eventual retirement savings.
For most people, the most appropriate fund will be the one that provides all the features you desire, at the lowest cost. This is not necessarily the cheapest fund.
Fund services
This includes such aspects as a useful member website and client service centre, education services, member newsletters and access to other member benefits such as discount home loans and credit cards for example. However, be careful that you’re not paying for services you don’t need.
Fund flexibility
You want to be sure that your chosen superannuation fund can grow with you as you move from your working life into retirement and beyond.
Important considerations are whether the superannuation fund can allow you to move seamlessly from accumulation phase into pension or drawdown phase, and also the types of income streams offered.
Of equal importance may be the flexibility to have any death benefits paid as a lump sum and/or pension to your dependants. Your financial planner can explain the importance of this aspect and how various options may potentially save your beneficiaries significant amounts in tax.
Your options
It is worth reiterating that while you may have the option to choose a superannuation fund, you don’t need to move anywhere if you are happy with your existing fund. But it is important to seek advice and do research to ensure you have made an informed decision.