As the impact of 2018’s banking royal commission continues to reverberate through Australia, the number of superannuation members looking to make a switch appears to be growing.
The number of Australians googling ‘best super fund’ began trending upwards in 2017 after then prime minister Malcolm Turnbull announced that a commission would be launched.
Searches reached a crescendo during the commission’s third round of hearings.
Several industry superannuation funds similarly reported large increases in member inflows in the six months to September 2018, with much of the incoming membership coming from funds that were criticised during the royal commission for various missteps and problematic behaviour.
The Australian Tax Office has made the process of changing funds relatively simple.
In the ATO’s own words: “You can change super funds by filling out a rollover form from the ATO and sending it to your new fund or by logging on to your MyGov account.”
That three-page rollover form requires a few personal details (name, address, tax file number etc), as well as the details of the fund that the member is leaving and the one the member intends to join.
Once the form is completed, it can be sent to either the receiving or forfeiting fund, which will then complete the process on their member’s behalf.
How to compare funds
While switching funds is itself a relatively straight-forward process, the real challenge for members is in selecting the right fund for their needs.
Canstar financial services group executive Steve Mickenbecker said there are four key considerations Australians need to make when choosing their fund:
- Investment performance net of fees
- Absolute fees
- The type of insurance offered and its associated costs
- The additional services offered by the fund.
“If you find the performance of your fund is lagging the market, or is not at least in line with the average or above, and this is a consistent trend then this is one good reason to consider switching,” he said.
Fees should also be looked at and compared in isolation of a fund’s performance, Mr Mickenbecker said, because “like death and taxes” these are a certainty no matter how well a fund does in a particular time period.
Insurance is particularly relevant for members who have recently switched jobs, Mr Mickenbecker said.
Blue-collar workers moving into a desk job could find themselves paying higher premiums for specialised cover they no longer need, and equally employees moving into riskier lines of work might find their existing coverage is no longer enough for their needs.
Know the risks
The benefits of moving funds will only be realised if the right fund, and the right investment option, is selected.
“You don’t want to end up in the wrong investment option because it can really hurt you down the track,” Mr Mickenbecker cautioned.
An example would be a 25-year-old opting into a conservative investment option which offers less chance of losses, but a similar reduction in returns.
Over the course of their working life, being invested in a conservative option would “probably leave them a whole lot worse off” than picking a riskier, higher-return option.
The New Daily is owned by Industry Super Holdings