4 things to look for in a new super fund in 2023
Thinking about switching up your super this year? This guide shows you the essentials to know first.
If you're considering reassessing your finances in 2023, make sure you don't overlook your super fund.
Your super fund is a major contributor to the funds you'll have available for retirement. It makes sense to ensure that your current fund meets your requirements.
If it doesn't, it may be time to make a switch.
So where should you start when you're weighing your super fund options?
We've put together some of the key considerations when assessing a super fund's suitability for your needs.
Though this isn't a comprehensive list of all the factors that go into deciding on a super fund, this will give you a jump-off point to work with.
1. Strong, consistent long-term returns
Past performance isn't necessarily indicative of future performance. But when you're looking at your current fund or considering a new one, it is important to look at its track record.
You want to have confidence that you're placing your funds with an organisation that has a history of responsible fiscal management and growth.
Super is a long-term investment so you can't just look at the prior year or 2. You want to look at its performance over longer periods – 5, 10 or even 20 years.
You also need to look at more than the pure returns. This is where the "net benefit" comes into play – the return you receive on investments post-fees and costs being removed.
A difference of just a few percentage points between funds on their net benefit can make a big difference year-on-year.
Let's look at CareSuper's Balanced option as an example. Over 15 years to December 31 2022, CareSuper's Balanced product returned $47,000 more than the average of surveyed retail funds*.
Net benefit isn't the only tool for determining a fund's performance but being aware of it can help you make a more informed decision.
2. Manageable fees
In Australia, there are 2 main types of super funds: for-profit and not-for-profit.
For-profit super funds are run to benefit shareholders, boards and members. Not-for-profits are run to solely benefit members and as a general rule, they tend to have lower fees.
For example, CareSuper is an industry super fund, which is run as a profit-to-members fund. CareSuper is committed to keeping costs low, while maximising the retirement savings of members.
Make sure to also look at the features and customer service included with the fees you're paying.
Looking over features, fund awards and other indicators will help you decide whether you're getting good value for money with your fund or whether a new fund is worth switching to.
As an example, CareSuper also won the Finder Industry Super Fund Customer Satisfaction Award in 2022.
3. Investment options that align with your risk tolerance and retirement goals
The way your super is invested today can have a significant impact on the assets you'll have available during retirement.
Now, this doesn't necessarily mean you need to become an investment expert overnight. It's a highly specialised skill set and it's important to consult with professionals rather than make hasty decisions.
But it is worth considering a couple of points. For example, how is your super divided between growth assets (e.g. shares) and defensive assets (e.g. fixed interest income or cash)?
In turn, how do the projected returns on your current mix align with your preferred time frame for retirement?
Although you may have been assigned to a specific product when you joined your super fund, you can generally make changes or even switch funds entirely if you feel it's necessary.
This way, you can put yourself in a better position to achieve your retirement goals by balancing risk with your desired outcomes.
CareSuper has 6 pre-mixed investment portfolios and 6 single-asset class options that members can opt for, plus a Direct Investment option.
There's also a Sustainable Balanced option for members who specifically want to invest in companies that respond to social and environmental concerns.
4. Insurance options
One of the benefits that the right super fund can offer you is appropriate insurance coverage.
For example, some people opt to have life insurance (sometimes referred to as death cover) through their super fund. Total and permanent disability (TPD) cover and income protection insurance are often available.
Although some people opt for separate policies from independent providers, having them combined into a single package can be a convenient and cost-effective option particularly if you have pre-existing health conditions.
If you're uncertain about your current cover, you can generally check it by looking at your annual statement or logging into your fund's online portal. Any cover that you're currently paying for should be clearly outlined.
There are a few different questions you should ask yourself when assessing your current coverage.
- What sort of a financial safety net do you need to protect your lifestyle?
- Do you have any dependents?
- Are you renting or still paying off a mortgage?
- Do you have any debts?
If you're unsure whether your current fund is providing the coverage you need, it may be worth looking into other funds. Depending on the specific product, they may be able to better meet your insurance needs.