Changing or consolidating your super funds is a significant decision that can impact your financial future. It’s essential to consider several factors to ensure you’re making the best choice for your unique circumstances. Here are the key aspects to keep in mind:
FEES:
Fees can significantly affect your superannuation balance over time. When comparing funds, look at the various fees they charge, including:
- Administration fees
- Investment management fees
- Performance fees
- Buy/sell spread fees
Please note, investment fees, performance fees and buy/sell spread fees are net of investment returns, meaning they have already been paid before you get your return value. Therefore, the most important aspect of fees to consider is you getting the service for what you are paying for.
If you are getting financial advice, you may find that you are paying higher administration fees – especially if your adviser is managing your superannuation investments on your behalf. These fees are necessary for the adviser to manage the portfolio and give you bespoke advice, support and ongoing services which you would not get directly with a super fund.
Remember, higher fees do not always equate to better performance. Ensure that any fees you pay are justified by the returns and services you receive.
PERFORMANCE:
Evaluating the performance of a super fund is crucial. Consider the following:
- Net Returns: Look at the returns net of fees to understand what you are genuinely earning.
- Past Performance: While past performance is not a guarantee of future results, it can provide insight into how well the fund’s investments are managed.
Ask yourself, are you getting what you pay for in terms of returns after fees? Consistently strong performance indicates effective investment management.
INSURANCE:
Super funds often include default insurance cover, such as life insurance, total and permanent disability (TPD) cover, and income protection. When considering a switch, evaluate:
- Your Insurance Needs: Understand your personal insurance requirements and if the default cover is sufficient.
- Existing Cover: Be cautious about cancelling existing cover, especially if you have pre-existing medical conditions that might prevent you from obtaining new cover elsewhere.
Losing default cover can leave you without protection when you need it most, so ensure any new fund meets your insurance needs.
YOUR RISK PROFILE:
Your risk appetite plays a significant role in selecting the right super fund. Consider:
- Investment Timeframe: How long will your money be invested? If you have a long investment horizon, you may be able to ride out market volatility for potentially higher long-term gains.
- Risk Tolerance: Understand your comfort level with investment risk. Super funds offer various investment options, from conservative to high growth.
Selecting a fund that aligns with your risk profile ensures your investment strategy matches your financial goals and comfort level with risk.
EASE OF BUSINESS:
The accessibility and user-friendliness of a super fund are essential for managing your investments. Evaluate:
- Online Access: Can you easily access and manage your account online?
- Customer Service: Is customer support readily available and helpful?
- Fund Flexibility: Does the fund offer the investment options you need? Are there ethical and value-aligned investment options if that is important to you?
A fund that is easy to manage and aligns with your values can provide peace of mind and confidence in your financial strategy.
When changing or consolidating your super funds, taking a comprehensive approach is crucial. Evaluate fees, performance, insurance, your risk profile, and the ease of doing business with the fund. Ensuring these factors align with your financial goals and personal circumstances will help you make a well-informed decision for your retirement savings.
By carefully considering these aspects, you can select a super fund that supports your long-term financial health and aligns with your values.