If you’ve just started your first job, or have landed a new shiny one, you’ll likely be given some important forms to fill out.
Among them will be a form asking you to choose a super fund. You’d be forgiven for giving it no more than a moment’s thought and simply opting for your employer’s default fund.
In some situations, that’s the best option. But if it’s not, and you don’t do your research, selecting the wrong fund now can have a massive impact on what’s in your wallet down the track.
Would you rather be old and potentially swimming in cash and fine wine, or old and struggling to fork out for bowls or bingo? We think you know the correct answer.
Where to start
Dr Martin Fahy, CEO of The Association of Super Funds of Australia, says superannuation needs to align with your personal brand and values.
“Do your homework – look at all the elements of super,” he says. “Check insurances, fees and costs, investment returns and other fund offerings. Look at investment returns over the long-term.”
Compare investment returns over at least the past five or 10 years, which will give you a much better indication than simply looking at last year’s top performing fund.
The next thing to look at is fees. If they’re high, they’ll be depleting your super balance each month. However, higher fees might be worth it if the fund has a record of high performance over time, says Dr Fahy.
Also look into the services provided by particular funds. Would you prefer a handy online service, or easy access to a call centre?
If you’ve had more than one job, it’s likely you also have super stashed in more than one fund, especially if you’ve been inclined to go with an employer’s default fund, says Dr Fahy.
“Moving all your super into one account, or consolidating your super, might help you save on fees and make managing your super easier,” he says.
Weighing up the options
The investment option you choose – for example balanced, growth or stable – depends partly on your appetite for risk, and your age.
“So long as you’re with a sensibly managed fund, a lot of the returns from your super are going to come from what’s called the asset allocation of the investment option you choose,” says Michael Miller, a financial planner with MLC Advice Canberra.
“This is about how much of your investment is held in assets like shares and property that are expected to have higher returns, but more extreme ups and downs along the way, and how much is in defensive assets like cash and bonds, which are expected to have lower, but more steady returns.”
Check the insurance
Mr Miller says super will often include life insurance, cover for total and permanent disability and possibly some income protection.
Think about what types of cover you may need now, or later. If you’re self-employed, make sure your income and circumstances are properly covered.