A SIGNIFICANT life event including change of job, starting back in the workforce after studying or taking parental leave or a return to Australia can trigger people to change their super fund.
However, an alarmingly high number of people remain apathetic about switching — Roy Morgan research found in 2014 only 3.3 per cent of people bothered to change funds.
But when it comes to either sticking with your fund or jumping ship, multiple factors should come into play including the long-term performance, fees charged and insurance costs.
Industry Super Australia chief executive David Whiteley urges Aussies to take notice of what the fund they are in or considering switching to is doing and knowing its “long-term net return.”
Industry Super Australia chief executive officer David Whiteley said there’s many factors to consider before switching super funds. Picture: News Corp AustraliaSource:News Corp Australia
“Super funds are incredibly diversified so they will be investing in all asset classes — if a fund has been outperforming others for a decade as opposed to a poor performer that’s a good sign,’’ he says.
“However people shouldn’t place absolute reliance on past performance and they have to be conscious past performance does not indicate future performance.”
One of the nation’s largest funds, Australian Super, has more than 2.1 million members and had 275,000 new members join in 2015.
The fund’s group executive of membership, Paul Schroder, says fees should be a key consideration when deciding to stay or switch funds.
AustralianSuper’s Paul Schroder says the fund had more than 275,000 Australians join it in 2015. Picture: News Corp AustraliaSource:News Corp Australia
“One per cent better performance will mean $97,000 more to a 25-year-old when they retire,’’ he says.
“And the same with fees, if these cost one per cent more you will have almost $100,000 less at retirement.”
So on a $50,000 you should be paying no more than $500 per year in fees.
But Whiteley says low fees doesn’t always guarantee good returns so you need to do your research on your fund and ask them questions before leaving or signing up to a new fund.
Insurance should also be carefully considered — this includes coverage for total and permanent disability, death cover and income protection.
Schroder says if you’re swapping funds understand the protection you have if something was to go wrong.
Originally published as How to find the best super fund
