Employees can select their super fund using the Australian Taxation Office's Superannuation standard choice form provided by their employer when starting a new job. This choice empowers workers but choosing a fund can be complex due to the numerous products from retail and industry funds.
In Australia, there's a wide range of superannuation funds and investment options. It's important to compare super funds based on key factors like competitive fees, strong past performance, a mix of investment and insurance options, and additional services like easy online fund rollover.
So when choosing a super fund, look for these features:
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.
A key part of choosing a super fund is understanding the options which impacts risk, returns and fees. This means users should know what options are available and what they are.
It's important to be aware of the different fund options available, as they can significantly impact your investment's risk, returns, and fees.
Here's an overview of the types of options typically found in super funds, along with their usual asset mixes. Keep in mind that the specific asset mix can vary from fund to fund.
Here it's important to note that, the risk level for single asset class funds can vary significantly depending on the specific asset class chosen. For example: Fixed income - Generally lower risk compared to shares or property. Australian Shares (Aust Shares) and International Shares (Int'l Shares) - typically carry a higher risk due to market volatility. Another one is property - can be moderate to high risk, depending on market conditions and specific property investments. Single asset class funds offer a focused investment approach, but the risk is concentrated since they lack diversification across different asset types.
Similarly, the risk level of indexed funds depends on the market index they track. For example, an index fund tracking a broad market index (like the ASX200) would generally have a risk level similar to a diversified share portfolio, which can be moderate to high. If the index is focused on a specific sector or type of asset, the risk could be higher or lower depending on the nature of those assets. Indexed funds aim to replicate the performance of their benchmark index and can be a cost-effective way to invest in a broad range of assets. The risk is associated with the market or sector the index represents.
When selecting a superannuation fund, one of the key considerations should be the fund's historical performance, particularly its long-term returns. It's important to focus on the average rate of returns over an extended period, like 10 years, as this provides a more accurate picture of the fund's performance through various market cycles.
The importance of focusing on long-term returns cannot be overstated.
Short-term fluctuations in the market can be misleading; what matters more is how the fund performs over periods like 10 years. This long-term view can give you a better sense of how the fund navigates through different economic cycles and market conditions.
To illustrate the impact of even a 2% difference in returns, let's consider different hypothetical examples to understand the impact. We'll use the superannuation calculator to compare the outcomes.
Let's say you're 25, earning $80,000 a year, making no additional contributions and have a current super balance of $30,000. Your annual fees are $300 and your rate of return is 7% p.a. Your projected super balance by age 65 is $514,260.
| Starting balance | Annual fees | Return rate | Additional contributions | Projected balance at 65 | Additional balance at 65 |
|---|---|---|---|---|---|
| $30,000 | $300 | 7% p.a. | $0 / year | $514,260 | - |
The calculator is also designed to show you how much your retirement balance can increase by switching to a super fund with lower fees or higher returns (or both!).
Using the exact same situation as above, and changing nothing but reducing the fees from $300 a year to $150 a year, your new projected balance at 65 would be $522,797. That's an extra $8,537 in your balance at retirement, just by switching to a fund with lower fees.
| Starting balance | Annual fees | Return rate | Additional contributions | Projected balance at 65 | Additional balance at 65 |
|---|---|---|---|---|---|
| $30,000 | $150 | 7% p.a. | $0 / year | $522,787 | $8,537 |
You can also use the calculator to see how much your balance is impacted when you change your rate of return.
Once again using the same example, except this time changing only the return rate from 7% p.a. to 9% p.a., your new projected balance at 65 would be $633,821. That's an extra $119,561 in your balance when you retire!
| Starting balance | Annual fees | Return rate | Additional contributions | Projected balance at 65 | Additional balance at 65 |
|---|---|---|---|---|---|
| $30,000 | $300 | 9% p.a. | $0 / year | $633,821 | $119,561 |
The calculator can also show you the power of making small, additional contributions into your super over your working life.
Using the same example, let's say your fund details stay exactly the same but you make additional annual contributions of $1,000 per year into your super. You'll instead retire with a projected balance of $574,557 - an extra $60,297.
| Starting balance | Annual fees | Return rate | Additional contributions | Projected balance at 65 | Additional balance at 65 |
|---|---|---|---|---|---|
| $30,000 | $300 | 7% p.a. | $1,000 / year | $574,557 | $60,297 |
As with most fees generally, the lower the better. Consider:
Need a bit more help choosing? No worries! Let's take a look at other features you want in a super fund in more detail.
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:
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:
To compare the insurance cover offered by two different super funds you may want to look at:
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.
Unless indicated otherwise, the information in the table is based on data provided by SuperRatings Pty Limited ABN 95 100 192 283, a Corporate Authorised Representative (CAR No.1309956) of Lonsec Research Pty Ltd ABN 11 151 658 561, Australian Financial Services Licence No. 421445.
*Past performance data and fee data is for the period ending Apr 2024
| Response | |
|---|---|
| Low fees | 77.56% |
| Strong performance returns | 76.97% |
| Brand reputation | 26.18% |
| Customer service | 18.5% |
| Type of investment option | 15.65% |
| Ethical and socially responsible investments | 13.39% |
| Risk exposure | 11.42% |
| Insurance options | 8.66% |
| Fund size | 7.19% |
| Super funds app | 5.02% |
| None of the above | 2.26% |
| Number of awards won | 1.57% |
| Other | 0.39% |
When it comes to choosing a superannuation fund, different individuals have unique needs based on their employment status, duration of stay in Australia, and financial goals.
The process of choosing a super fund can be quite personalised, and it's important to consider these factors to find the most suitable option for your circumstances.
Students typically have different financial priorities and may not have a steady income. When choosing a super fund, students should look for:
Temporary residents need to consider their duration of stay in Australia when choosing a super fund:
Backpackers usually have unique requirements due to their transient nature of work and travel:
In each case, the key to choosing a superannuation fund lies in understanding personal circumstances, financial goals, and the specific features and benefits that different super funds offer.
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.
Broadly, funds in Australia are mainly of two types: accumulation and defined benefit funds.
In accumulation funds, the value of your super grows over time based on contributions from you and your employer, as well as investment returns, after accounting for fees and costs
Defined benefit funds, on the other hand, calculate your retirement benefit through a formula considering your and your employer's contributions, your average salary before retirement, and the length of your employment. These are commonly found in corporate or public sector funds but are less common now and often closed to new members.
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.
|
| Public super funds | Primarily for government employees, these funds generally feature a modest range of investment choices. They often combine accumulation and defined benefit members, with newer members typically in accumulation funds.
|
| Corporate super funds | Set up by employers for their employees, these funds can be managed by large companies or operated by retail or industry funds.Corporate funds provide a variety of investment options, especially those managed by larger funds. While some older funds are defined benefit, most are accumulation funds. They tend to have low to medium costs, particularly for large employers, and aim to return all profits to members, except those run by retail funds. |
| 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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Deciding whether to stay with a default MySuper product or switch to a different super fund depends on individual financial goals and circumstances.
While MySuper products, typically balanced funds, are designed as a default option with simplicity, low fees, and basic features, it's worth comparing them with other super funds.
Other funds might offer better returns or lower fees, and could be aligned with your risk tolerance and investment goals. It's advisable to review and compare the performance, fees, and features of various funds, and consider switching if you find a more suitable option.
Deciding whether to have insurance cover within your super fund depends on your personal circumstances and needs.
It's important to consider factors like your financial responsibilities, dependents, health, and existing coverage outside super. Insurance through super can be cost-effective as it's often cheaper and premiums are paid from your super balance, not out-of-pocket.
However, it may reduce your retirement savings. It's crucial to assess the type and level of cover you need and compare it with what's available outside super.
You are not eligible to choose a super fund for your super guarantee contributions if:
For comprehensive details on employment rules in Australia and guidelines on when a contractor qualifies as an employee for super guarantee purposes, it's recommended to visit Fair Work Australia's website and the Australian Taxation Office.
Use our free superannuation calculator to see your projected retirement balance, and how this could change by switching funds.
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My wife and I have an SMSF in excess of $3million each. I no longer want the effort to manage the SMSF on a frequent basis. In looking for an alternative, apart from past performance, what other factors are important in both industry or retail funds? We are both over 80 years old.
Hi Alfred,
We’re not licenced to provide personal advice, so we’d recommend engaging a financial advisor to give you advice about your sizeable retirement fund. They can help you work out the best way to structure your spending and perhaps also your plans for inheritance, if that’s a consideration.
Generally, in terms of choosing a super fund, you’ll want to consider your age and risk profile. A fund with strong performance and low fees could work.
Hope this helps!
Which super is best on growth and low on fees
Hi, we aren’t able to offer any product recommendations or advice. There’s no one super fund that is ‘best’ for everyone. You can compare funds with our comparison table, and use the headings at the top of the table to sort by fees or performance returns: https://www.finder.com.au/super-funds
I wanna start working and they asked be Superannuation but don’t know which one I choose
Hi Mika,
You can learn more about how to compare super funds with our guide: https://www.finder.com.au/super-funds
A few things to look for when choosing a fund is: low annual fees, high long-term returns and an investment strategy you understand and agree with. If you’d like some personal advice on which super fund would be best suited for you we suggest you speak with a financial adviser.
Thanks,
Alison
The amount of my superannuation has been decreasing. I didn’t notice before so I change my super fund and I found that it is decreasing as well. What should I do?
Hi Supawan,
Thank you for getting in touch with Finder.
I suggest that you seek financial advice on how your super could increase.
I hope this helps.
Please feel free to reach out to us if you have any other enquiries.
Thank you and have a wonderful day!
Cheers,
Jeni
Hello
My partner is self-employed, 50 years old and never have had a superannuation. Now I try to figure out what he will need.
He works in the computer industry and has not a huge income. Do you have any tipps where he can look for a super or what we have to think about to choose clever the super?
Thank you so much for your help!
Isabelle
Hi Isabelle,
Thanks for leaving a question on Finder.
Your partner who is self-employed can avail of his own choice of the super fund since anyone who is in the workforce can choose any superannuation fund to undertake. You can check which form of contribution and the super fund will work for him. You can also consider speaking to a financial adviser for professional, personalized advice.
Cheers,
Joel