Australians are living longer, healthier lives, and retirement is a time filled with exciting possibilities. But to make the most of your golden years, financial security is key. Did you know that even a small difference in fees charged by your superannuation fund can add up to a significant difference in your retirement savings?
Superannuation, or “super” for short, is a long-term savings plan designed to help Australians build a comfortable retirement. Throughout your working life, super contributions are made from your salary into your super fund, where it’s invested to grow over time.
In Australia, you generally have the right to choose your own super fund. Your employer will usually give you a “standard choice form” when you start a new job. This form allows you to select your preferred super fund, stick with your existing fund, or choose the employer’s default fund.
However, there are some exceptions. If you were a new employee starting before November 1, 2021, and you did not provide details of an existing fund, your employer may be paying your super into a default fund they have chosen. It’s always best to check your payslip and with your employer to understand how your super is being handled.
By taking charge of your super fund now, you can ensure it’s working hard for you and helping you achieve your retirement goals.
Signs You Might Benefit from a Super Switch
We’ve explored key factors to consider when assessing your superannuation. Now, let’s identify some situations where reviewing your current fund might be beneficial:
- Multiple Super Accounts: Having multiple super accounts can lead to unnecessary fees. Consolidating your super into a single fund simplifies management and potentially reduces costs. However, sometimes, there are good reasons to have multiple superannuation accounts. For example, the additional account/s may have insurance cover you want to retain. Consult a financial advisor to learn more.
- High Fees: Fees can erode your long-term savings. If your current fund has high fees compared to industry benchmarks, exploring lower-cost options like industry or public sector super funds could be advantageous.
- Underperforming Investment Strategy: While past performance isn’t a guarantee of future results, a super fund consistently lagging behind industry benchmarks might warrant investigation. Consider exploring funds with a strong track record of growth.
- Mismatch with Your Risk Profile: Your risk tolerance and investment goals evolve throughout your life. If your current super’s investment style doesn’t align with your current risk appetite, a switch to a more suitable option might be advisable.
Keeping Costs Low: Optimising Your Super Fees
Fees associated with your superannuation can have a significant impact on your long-term savings. Let’s talk about these fees and explore some strategies for potentially reducing their impact:
Understand Fee Structures
Superannuation fees can be charged as a percentage of your account balance or as a flat fee. Percentage-based fees can grow over time as your balance increases. Flat fees remain constant regardless of your balance. Being aware of these structures allows you to make informed decisions.
Compare Super Funds
The Australian Taxation Office (ATO) has an online comparison tool that lets you compare MySuper products based on fees. Comparing super funds with such tools can help you identify potentially lower-cost options with a strong track record.
Explore Lower-Cost Alternatives
Industry super funds and public sector funds are often known for their competitive fee structures. These funds operate with a member-owned focus, potentially resulting in lower fees compared to some for-profit institutions. Researching these alternatives could result in significant cost savings, and potentially a larger nest egg at retirement.
