How to choose a super fund
When choosing a super fund look for one with low fees, high past performance figures and an investment strategy you're comfortable with.
Look for these features when choosing a super fund:
- High past performance figures, particular 5 and 10-year figures
- Low fees compared to other funds (preferably annual fees less than 1.5% of your balance)
- An investment strategy that suits your risk tolerance and preferences
Performance, fees, and strategy are 3 key features to look for when choosing a super fund. However there are other features as well, which we'll go into these points in more detail later in this guide, or if you're ready to choose a super fund you can use our comparison table below right now.
Choose a super fund
How do I choose a super fund?
Need a bit more help choosing? No worries! Let’s take a look at the features you want in a super fund in more detail.
Investment options and strong past performance
Super funds are basically big investment portfolios, with professionals who invest members’ money on their behalf. Historical performance of the fund, typically expressed as a percentage, is generally a measure of the return on investment the fund has achieved previously. You’ll mostly want to look at the fund’s performance for the last 5-10 years, as long-term performance is a better indicator than short-term performance.
While historical performance isn’t everything and past performance is not an indication of future performance, it's definitely an important factor to look at when choosing a super fund.
As well as performance make sure you take a look at:
- Investment options available. If you're looking for a particular type of investment option, such as a high growth option, check if the fund offers this before joining.
- How much control you have. Some people might want a managed super fund that still lets them do some of their own investing. Others might be particularly keen on the forex market, share trading, property or other investment types, and want a super fund that lets them put their money where they want it most.
- Ethical investing. If you'd prefer your savings to be invested ethically, such as in renewable energy rather than coal mining, you might want to consider an ethical super fund.
The super fund fees
As with most fees generally, the lower the better. Consider:
- Whether they’re worth it. You might come out ahead paying more fees for better investment returns, rather than choosing a low-fee fund that has consistently underperformed.
- Exactly how much you’re paying: Superannuation fees can be extremely confusing. Ideally you’ll want to understand exactly how much you’re paying in fees, and consider this as a percentage of your super balance. As a loose rule of thumb, ty to aim for annual fees that are less than 1.5% of your balance.
- Why the fees are higher or lower. A lot of super funds offer passive, index-based investment options which are much cheaper than actively managed options.
The insurance options
Most super funds offer insurance policies within your account, which are often slightly discounted. Generally, you can get a basic level of insurance cover for:
- Death (life insurance)
- Total and permanent disability (TPD insurance)
- Temporary inability to work (income protection insurance)
To compare the insurance cover offered by two different super funds you may want to look at:
- The types of cover: Do they both offer life, TPD and income protection insurance, or does one of them offer fewer cover types? Do they even offer any insurance at all?
- The payout: How much is paid out for each of the three cover types?
- The premiums: How much is it costing you? The cost of insurance will be taken out of your investment returns.
- Can you increase your cover? If you want more insurance cover, check how much you can increase your level of cover by.
All three insurance types can be found through super funds, or outside of superannuation instead. However, they work a bit differently in each case. In very basic terms, you might think of super insurance as the cheap “no-brand” option, and insurance outside of super as the “deluxe brand name” option. Depending on your situation, you might want to have it all inside super, all of it outside super, or a combination of both.
How to choose between the different types of super funds
There are various types of super funds which can be put under two different categories – profit for member funds and retail superannuation funds. Although there are still debates going on which category is better, understanding them is much better since their advantages and disadvantages are relative to the needs that you have. Compare the different types of super funds available using our table below.
|Super fund type||Features|
|MySuper||Most employers are required to offer a MySuper fund as a default option for people who cannot (or don’t wish to) select their own fund. These are generally found as defaults, but you may also nominate a MySuper fund. It’s designed to be a safe option for most Australians.|
|Retail funds||Retail funds are widely-available commercial products, operated by financial institutions such as banks and insurance companies.|
|Industry funds||These superannuation funds are generally designed for workers in a specific industry, however most are open to everyone to join. They're not-for-profit funds that exist for the benefit of super members only, and aren't part of a wider financial institution. They are owned by members not shareholders.|
|Self-managed super fund (SMSF)||The do-it-yourself super fund. You are responsible for investing your superannuation, as well as looking after the tax and legal obligations that go along with it. These are explained in more detail in this guide, however it's not recommended that you start an SMSF unless you're a confident investor with a large balance of at least $250,000.|
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