How to choose the super fund that’s right for you
To retire the way you want, it’s important to choose a super fund that’s right for you. But with so many funds (and investment options) to choose from, picking the right one can be tough. In this article we look at how to make sense of super and how to tell if a super fund is right for you.
Making sense of super
Mark Twain said, “The secret of getting ahead is getting started.” This is especially true for super. Even a small understanding of super can help you choose a fund that’s right for your current circumstances and put you on the path to a better retirement.
Your first step might be choosing between control, or ease and flexibility. If you want control, a self-managed super fund (SMSF) can help. But SMSFs often come with burdensome responsibility, time, significant compliance, and possibly an understanding of markets and investments.
If you want ease and flexibility in your super, a MySuper fund can be a good way to go. MySuper funds are employer default funds for people who have not made a choice about where their super goes. They’re often (but not always) simple, low cost, and can be easily compared because they typically follow the same format. As of June 2019, MySuper products accounted for about 26% of all super monies1. Since 1 January 2014, only funds offering a MySuper product have been eligible to receive default super contributions for new employees.
But you can have ease, flexibility and control. To get that, it may make sense to choose an investment option within a MySuper fund like VicSuper***. Profit to member or industry funds, which hold about a quarter2 of Australia’s total superannuation assets, are attracting strong inflows for three key reasons a) they’re focused solely on members’ interests b) they offer a wide range of investment options which typically generate higher investment returns and offer competitive fees; and c) many provide value-added services such as financial advice, member help, and competitive insurance coverage.
Why choose a super fund and how to do it
Choosing your super fund can make a real difference to your retirement.
The issue is that funds can differ greatly—by type (e.g. industry, retail, public sector, corporate), investment options, fees, advice, insurance, and so on. These differences can be subtle—investment strategy, ethics and board structure, for example - but they can have a big impact on a member’s experience in retirement and the lead up to it.
Three key factors to consider when choosing a super fund are:
- Fees and costs - know what fees your fund charges. Profit to member or industry funds, particularly larger funds, typically offer competitive fees (as mentioned) and benefits of scale3.
- Investment returns and strategy - returns vary over time, so it’s important to look at your prospective funds’ long-term investment performance and compare funds with the same or similar investment strategy, while taking into account fees and costs that can eat up the return. When reviewing investment options, assess your tolerance for risk and return (this review can be done with a qualified financial planner).
- Insurance and other benefits - check out prospective funds’ insurance policies and benefits.
Other things to look at are fund ethics/ethos, member support, quality and transparency of communications, and awards and citations.
Super comparison websites such as Canstar, Chant West, Morningstar and Super Ratings can help you review a fund’s credentials, but they should not form the sole basis of your fund decision. You may wish to consolidate your super into one place, reduce the fees you’re paying, invest in a more suitable option with better long-term returns, move to a fund with ethics and values more aligned to your own, or simply because you’ve moved from a corporate job to a government job, for example.
At VicSuper, our planners can help you determine your current situation and what kind of advice you need to choose the investment option that works for you. There are many reasons why VicSuper is a lifetime choice for new members or members making the switch:
- As a profit-to-member fund, we keep fees as low as possible and we don’t pay commissions to financial planners.
- Solid long-term investment returns – we aim to deliver competitive returns for our members.
- Award-winning value – we’ve been awarded Constar’s 5-Star Rating* for Outstanding Value Superannuation in 2020, one of only six super funds across Australia to receive this rating. We’ve also received SuperRatings’ Platinum** rating – their highest rating – seven years in a row (2013-2020), confirming that VicSuper continues to be one of the “best value for money funds” in Australia.
- High quality services – we were awarded Best Fund: Integrity by Chant West (2019)* for offering lower fees and premiums, while continuing to provide the benefits and services members really need, like quality investment and insurance, and member services and advice.
Learn more at vicsuper.com.au/about-us/why-vicsuper
1Percentage calculated from ASFA Superannuation Statistics, June 2019
2APRA quarterly superannuation statistics June 2019
3Sydney Morning Herald article, 20/10/19, information from Kirby Rappell, SuperRatings director
* A 5 Apple rating (gold) is the highest rating from Chant West. For a super fund to earn 5 Apples it must be one of the ‘Highest Quality Funds’. Chant West is an independent organisation. For details on their ratings, criteria and methodologies see chantwest.com.au.
* The Canstar 5-Star Rating for Outstanding Value Superannuation was awarded in March 2020.
** SuperRatings is an independent superannuation ratings and research company. Platinum is SuperRating’s highest rating. SuperRatings and Chant West are independent organisations. See superratings.com.au and chantwest.com.au for ratings, criteria and methodologies.***This is general information only and does not take into account your specific objectives, financial situation or needs. We recommend you seek professional advice for your own circumstances. Contact us to make an appointment to see one of our representatives. When members receive advice, they receive it under our financial planning business Aware Financial Services Australia Limited’s own AFS licence. Aware Financial Services Australia Limited ABN 86 003 742 AFSL 238430 is wholly owned by Aware Super Pty Ltd as trustee of the fund. You should read their Financial Services Guide before making a decision. Issued by Aware Super Pty Ltd ABN 11 118 202 672, AFSL 293340, the trustee of the Aware Super ABN 53 226 460 365.