What to look when choosing a super fund
The income you have in retirement is one of the factors that will dictate how well you live once you hang up your “work boots”. For most people, the balance of their super fund is going to play a big part in determining the amount of income they will have in retirement.
Will you be able to live the life you want in retirement, whether that be travelling, taking up a new hobby, playing golf or spending time with the family? Choosing the right super fund now can make a big difference later on.
Here are three things to consider when choosing the right super fund:
#1 Competitive fees
Just like a bank account, super funds have a range of fees for fund members. The fees can range widely from fund to fund and can depend on the type of investments that have been chosen within the fund. A small increase in fees can mean big costs over time as your account balance grows. The last thing you want is for your investment returns to be eaten up by high fees.
Make sure when choosing a super fund that you have a look at their fees compared to other funds on the market. Ensure you also understand what the fees are for – which can include administration costs or the fees related to managing the fund(s) you are invested in. Different super funds might offer different levels of service and/or extra benefits. Before you starting paying for these extra benefits though, make sure you actually need them.
#2 A good selection of investment options
Super funds usually offer a range of investment options, giving members’ choice within asset classes such as cash, bonds, property and shares. When comparing super funds it is important to have a look at the investment options the funds make available to their members.
Investment choices and therefore performance of your super fund can impact the balance available later in life. Small variations in long-term performance can make a big difference to your super account and even a 1% difference can possibly add thousands of dollars by the time you retire. We recommend speaking to a financial adviser you trust to help you work out the investment options that are best suited to helping you achieve your financial goals, while still ensuring you can sleep at night.
The tricky part can be finding a super fund that has balanced reasonable fees with a consistent management track record, and this is where a financial adviser can help.
#3 Insurance
Most super funds offer a ‘default’ level of cover to their members, so chances are you will already have cover in place through your super fund. If you have multiple super funds, this means you are probably paying multiple sets of insurance premiums, which could have a significant impact on your final balance if not reviewed.
The May 2018 Federal Budget announced some changes around when insurance cover can be offered ‘by default’ and it is important to review your insurances within super to see if this affects you.
If you do have insurance included in your super now, it is highly likely that the default level of cover you have will not be sufficient to meet your needs. Research shows that 95% of families do not have adequate levels of insurance*, and that the median level of life cover held by most Australians meets only 61% of their basic needs^. Your financial adviser can help you work out if the level of cover you have is sufficient – and if your super fund is the right place to hold that insurance.
At the same time, you need to be very careful about cancelling valuable insurance cover by mistake. If your medical history has changed since the default cover was put in place, you may find that you now can’t get the same level of cover elsewhere. For this reason, we strongly recommend you speak to your financial adviser before closing any superannuation funds with insurance cover attached.
As you can see, there are a few basics to check when you’re choosing the right super fund for you. And remember, reviewing your superannuation fund on a regular basis is vital to making sure you are on track to achieve your financial goals.
Let us give your super a good review
At Live Well Financial Planning, we know how important your super fund is when it comes to keeping you on track to achieving your goals. We can guide you through all the decisions you need to make with your super. By getting to know you – and what you want in the future, we can provide tailored advice, tracking your progress at every stage and helping you fine-tune your super strategy to achieve your goals.
Contact Us to book your complimentary first appointment with our team.
* The LIFEWISE / NATSEM Underinsurance Report: Understanding the social and economic cost of underinsurance, February 2010
^ Rice Warner, Underinsurance in Australia, 2015