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what to look for in a super fund

If we buy a new car, we share the news with friends and take them for a spin. When it comes to superannuation – most people’s second biggest investment – we only mention it if we want them to spin out.

For many, choosing a super fund is a matter of falling into your employer’s default fund, to avoid filling out another form. But the vehicle for your retirement should be given more of a test drive than that.

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what to look for

You need to compare the features of your default fund and current fund with a couple of others, and consider these features:

  • fees

    Some funds charge flat fees and others percentages, and it is worth doing some sums as a difference of just 1 per cent, on a balance of $100,000 over 20 years (assuming a 7 per cent return) can add $66,000 to your super. And that can mean a whole year’s budget.

  • investment performance

    Rarely do last year’s winners back up year after year. You need to compare a fund’s performance over at least five years and look at those with a solid reputation. They are more likely to provide the strong performance you need over time.

  • investment options

    Take a good look at a fund’s investment options to ensure they have ones which suit you. Many offer portfolios of investments which may vary. For instance, a balanced fund can have anything between 40 to 60 per cent invested in share markets. And if you’re looking for steady income, you may want something that returns potentially more than a term deposit, although there may be greater risk.

  • insurance

    Competitively priced basic insurance (life and temporary and permanent disability insurances) without a medical examination is one of the many benefits of super. Compare the levels each fund offers and what the cost is, as it is usually deducted from your account balance. You will enjoy the insurance you need at a reduced cost, with no impact to your take-home pay (but it also means you effectively have less going towards your retirement savings).

    These are your basic points of comparison and you need to consider what is more important to you. For instance, delivering a performance of 1 per cent above others means little if their fees are 1.5 per cent higher.

    If your financial adviser is producing a strategy for you to consider,  ask what fees or commissions they are being paid. It may colour their opinion, and recent research suggests it can happen in a few instances.

    *ipac financial advisers are paid a salary and charge on a fee-for-service basis. They do not receive commissions.

compare

There are sites which compare various super funds for you:

 

Whatever choice you make, take the time to make the right one and seek professional advice. Your super is an important vehicle for your retirement. Make sure it’s a smooth ride.

*Shadow shopping study of retirement advice, Australian Securities and Investment Commission, March 2012.

 

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