Compare super funds now to enjoy a stress-free retirement later. Here's how to find the right super fund for your needs.
While superannuation is the main way of saving for retirement and is mandatory in Australia, there are many different funds available. Finding the right one for you can be extremely beneficial and all Australians should take the time to make sure they’ve found the best option for their needs. However, what you consider to be the “best” depends on your situation, including your age, appetite towards risk and also your personal preference.
This guide looks in depth at retail and industry funds and compares some of the best options side-by-side, including fees and investment performance. For information about self-managed super funds (SMSFs) take a look at our comprehensive SMSF guide instead.
What is superannuation?
Superannuation is basically a large investment portfolio with tax benefits, and is a way of ensuring that you will have a source of income in retirement to minimise the need for government assistance in the form of the aged pension. It has other advantages as well: it gives fund members access to cheaper insurance such as life, disability and income protection cover. It's also taxed at a lower rate (15%) during the accumulation phase, which makes it a very attractive form of investment through financial growth.
In the past, people relied on their personal savings in retirement and often topped up with a government pension, but things are changing. We are now living up to 20 years longer in retirement and our superannuation is an important source of income if we want to maintain a reasonable standard of living when we’ve left the workforce.
Superannuation works in the following way
- Your employer makes compulsory contributions on your behalf (currently 9.5% of your gross salary) into a super fund that you or your employer nominate.
- You have the option of making your own contributions as well, and the government may also contribute if you are a low- or middle-income earner.
- Your superannuation fund invests the money on your behalf and it grows steadily over many years, accelerating in the last few years when the sum is greater.
- You retire from working life and access your super, either in the form of a lump sum payment or as a regular income stream.
Is superannuation compulsory?
Yes, all Australian employers are required to pay superannuation to their employees. This is currently 9.5% of the employee's annual earnings, and is called the Superannuation Guarantee. Employers need to pay super into their employee's nominated fund at least four times a year. Australians who are self-employed generally are not required by law to pay themselves super, but it’s definitely a wise idea to do so.
There are a few situations where employees are not legally required to pay superannuation, including:
- If the employee earns less than $450 a month
- If the employee is under 18 and works less than 30 hours per week
- If the employee is not an Australian resident and completes the work outside of Australia
Finding the best super fund for your needs
Since super is a key source of your income during retirement, it's important to consider certain factors when you compare super funds in order to choose the right one for your circumstances, tolerance for risk and life stage.
Different types of super funds
There are two main types of super funds: accumulation funds and defined benefit funds. Defined benefit funds are very rare, so this guide discusses accumulation funds in detail. There are various types of accumulation funds available to Australians, which are outlined below. Click on the guides below to find out more about specific types of super funds.
MySuper accounts have basic features and fee structures allowing members to compare funds easily based on cost, investment performance and insurance. Read this guide to find out more.
Industry Super Funds
Industry funds are designed for workers in a specific industry and often offer lower fees and a variety of insurance and investment options. Read this guide to compare industry super funds in Australia.
Corporate Super Funds
Corporate funds are offered by businesses to their employees. These are generally default funds but are not openly available to the public.
Ethical Super Funds
An ethical fund chooses investment options based on a set of social, environmental and ethical criteria. Read this guide to find out which super funds offer ethical investment options.
What is lost super, and how can you find it?
Losing some of your superannuation is easier than you think. If you’ve changed jobs or moved house, you may have some lost super. But don’t worry, you can find your lost super and claim it back! If you suspect you may have some lost funds, you can create a myGov online account to search for any missing super.
Find out more about what lost and unclaimed super is and the steps you need to take in order to find it. Once you're able to find your lost super, you can easily claim it back and consolidate it to your current fund. Read this guide to find out how.
Accessing your super
Because superannuation is designed to fund your senior years, you generally can only access it once you reach retirement. The earliest opportunity you have to access your super is when you reach your preservation age, which is determined by the year you were born as shown in the table here.
There are some situations where you may be eligible to access your super before your preservation age. These include if you have a total and permanent disability, a terminal illness or are experiencing extreme financial hardship. Read our comprehensive guide to find out more.
Got it! What now?
Now that you understand how superannuation works and how to choose the best fund for you, it's time to do just that. Head to our comparison table at the top of this page to compare super funds, and click "Go to Site"if you'd like to open an account or learn more about the fund.