It’s as important as choosing a date for tonight – if not more.
Have you read our article Superannuation Basics for Beginners? If you haven’t, what are you waiting for? Head over there now. If you have, great! Now, it’s time to find out which super fund is your perfect match. But before that, check with your employers whether you can choose a fund yourself.
Generally, super funds are divided into two categories:
1. Accumulation funds
This is the more common type. As the name implies, this type of super fund accumulates or grows your money overtime, depending on the investment option that you choose.
2. Defined benefit funds
This type is usually found in corporate or public sector funds. With no investment options, defined benefit funds depend solely on the contributions, your working period with the same employer and your final salary when you retire. And after being a member of defined benefit funds for 25 years, you might benefit up to five times your final salary as a lump sum.
If you don’t choose a fund yourself, your employee will commonly pay their contributions to MySuper, which is known as the ‘default’ super fund account – unless you have been a member of defined benefit funds. If you do want to choose, here are the types of super funds you can find out there:
– Retail funds
– Industry funds
– Public sector funds
– Corporate funds
– Eligible rollover funds
– Self-managed super funds
Most types offer more or less similar services. So, instead of comparing different funds from their names, let’s take a good look at these points:
1. Investment options
Each fund offers different investment options. For example, retail funds can offer up to hundreds of investment options, while industry funds only offer a few options. Other than choosing one investment that meets your needs, don’t forget to check the risk probability and return period, too.
2. Costs and fees
Like any other investments, super funds also require a number of fees, such as administration fee to manage your account, investment fee to manage the investment alone, buy/sell spread fee whenever you make transactions or contributions, and other fees that you usually find in any investment accounts.
Check if you can get extra benefits by making more contributions yourself.
4. Performance and insurance
Check how well the fund performs for the last five years and if it provides insurance.
5. Other services
Some funds offer extra services, like advice service that provides you insights by their financial adviser.
We personally think the most important point to consider when choosing a super fund is the investment, but not investment alone. Combine all five points above to compare which super fund will be your best match. Remember that you can have several super fund accounts at the same time. So if you can, try MySuper and two other funds for around six months. This way, you can stick with the one that benefits you the most and swipe left the other two!