Choosing a super fund
Picking your perfect match
Choosing a super fund is a bit like dating. Pick the right fund
and you'll be set for a long, happy and comfortable life when you
retire. Set your sights on the wrong one and you're in for a world
of pain. Here's how to choose the best super fund for you.
Check if you can choose your
Defined benefit funds are usually very advantageous so think
carefully and seek advice before you leave one.
Most people can choose the fund for their employer's super
contributions. However, some people who are covered by industrial
agreements and members of defined benefit
funds don't have this choice.
To find out if you can choose a fund, check with your employer
or see the Australian Taxation Office's (ATO's) information on choosing a super fund.
If you do have a choice, your employer will give you a 'standard
choice form' when you start work. The form sets out your options
for choosing a super fund. You can select your own or go with your
How to compare super
There are a few key things to consider when comparing super
funds. Spend some time looking at your choices.
|Things to compare
||What to look out for
||The lower the better
||Make sure there are options that suit
your needs and comfort with risk
||Your employer may pay more than 9.5%
for certain super funds or if you make extra contributions
||Pick a fund that has performed well
over the last 5 years - do not chase last year's best
||See what cover is available and what
it will cost
||Call the fund or browse their website
to see what other services they offer
Where to find information on different super funds
You should be able to find information on fees, investment
options, benefits and performance of a super fund in its product disclosure statement (PDS), which
is usually available on the super fund's website. Alternatively,
you can call the fund to request a copy of the PDS.
When comparing funds, make sure you compare apples with apples
by paying attention to factors like how often the
quoted fees will be charged on your account and the
period the investment returns relate to. For example, a
5-year average return for the period ending 30 June may be
different from a 5-year average return for the period ending 30
When looking at investment returns, also make sure
your comparison is based on the investment option you want to
invest in. There's no point comparing balanced investment options
if you will actually choose a conservative or growth option.
Super fees and costs
All super funds charge fees and costs, though some less than
others. Generally, a super fund with low fees and costs will build
your super faster if it invests in the same assets. You'll need to
weigh up fees and costs against other important factors like risk,
likely returns and services before you choose a super fund.
What fees and costs can super funds charge?
There are many different types of fees associated with your
super fund. Super fees can be either a dollar amount or a
percentage, and are typically deducted from your account on a
regular basis at the end of each month or when an action is
The main types of fees are:
- Administration fees - Cover the cost of
operating the fund and keeping your super account.
- Investment fees - Fees for managing your
investment which can vary for different investment options.
- Indirect costs - Costs paid by your super
fund to external providers that affects the value of your
investment. Typically, these are costs paid to investment
- Advice fees - Fees for personal advice
provided about your super and other investments. Your adviser may
also receive fees and commissions for certain investments they
recommend to you and these are not included in product disclosure statements (PDS) by the super fund.
- Switching fees - Fees for changing your
investment option within the fund.
- Buy/sell spread fee - You may pay this every
time you make a transaction, including making a contribution,
switching and withdrawing. The fee covers some or all of the cost
of transactions entered by the fund.
- Insurance premiums - The cost of
insurance provided through your super fund. Many super funds have a
set default insurance option. You can usually choose to change your
level of cover based on your needs.
- Exit fees - A fee for leaving the fund.
- Activity-based fees - These fees are only
charged if your super fund provides you with a particular service,
for example, a family law split fee, where you're charged to split
your super following a separation and family law court order.
A 1% difference in fees now could be up to a 20% difference in
Check your annual statement to see if
you're paying for financial advice. Make sure you are happy with
what you are paying. If you are not happy or unsure about any fee,
contact your super fund and consider asking how you can stop these
fees being deducted.
Super funds may offer other services which may attract special
fees. Refer to your super fund's website or read the fund's PDS for details.
Case study: Gerri chooses lower super fees
Gerri is 30 and earns $50,000 per year as a librarian. She
already has $20,000 in her super. After shopping around for another
super fund, she changed to one with only 1% total costs and no
buy/sell spread fee which invests in similar assets. Her old super
fund charged 2.5% with no buy/sell spread.
By changing to a super fund with lower fees, Gerri will have
$81,000 more in her super when she retires at age 65. Her super
account balance will be $336,000 instead of $255,000.
How to compare super fees and costs
Comparing the fees and costs on your super fund with those of
other funds can help you choose a fund that's good for you. The
expected returns on your investment are also important, as well as
how much risk you are taking. The best way to compare the fees and
costs is by looking at the fee example shown in the PDS your super
fund has sent you.
MySuper accounts generally have lower fees and costs and can
only charge certain types of fees. See Types of super funds to find out
However, it does not make sense to compare funds that are quite
different just on the basis of fees and costs. For example, funds
that have a lot of property or private equity may have higher costs
but they are likely to have different levels of risk and expected
return, compared to funds that have more cash and fixed interest
Some superannuation funds offer platforms for you to choose your
investments. These platforms may have lower fees and costs in their
PDS because these figures just cover the fees and costs of the
platform. You also need to consider account fees and other costs
that will be charged inside the investments on the platform's
Super comparison websites can be useful to help you compare
super funds, but you shouldn't choose your super fund on the
website rating alone.
Some super comparison websites include: Canstar Cannex, Chant West, Morningstar, RateCity, SelectingSuper and Super Ratings. Note that MoneySmart has
not independently verified or approved the data or ratings
published by these websites. These websites are responsible for
their data and publications.
All these websites have some information for free, but some also
offer more detailed information for a fee.
How do super comparison websites rate different super
Each super comparison website has different views on the best
way to rate super funds. For example, some place the highest
importance on fees. Others may prioritise investment performance
and strategies. Look at the website's explanation of their scoring
On some super comparison websites, the majority of super funds
get a top rating. Other websites reserve their top rating for what
they consider the best 10% of super funds.
How do super comparison websites measure investment
One company, Chant West, calculates investment returns
differently from super funds and other comparison websites.
Everyone deducts investment fees and tax from returns. However,
Chant West shows investment returns before the
deduction of percentage-based administration fees and any ongoing
adviser commissions. Other comparison websites and super funds
typically report investment returns after these
Chant West's approach means that its reported performance
figures can be up to 1.5% per year higher than what the super fund
No comparison service or fund deducts fixed dollar
administration or member fees (e.g. $50 per year) from
reported investment returns. This is because their impact depends
on the balance in your super account. A $50 per year member fee is
0.5% of a $10,000 super account, but just 0.05% of a $100,000
Don't assume a top-rated fund will get above-average investment
Once you have information on different funds, plug the details
into the superannuation calculator to compare them.
What happens when you don't choose
If you don't choose a super fund when you start a new job, your
employer will pay contributions for you into a 'default' fund
that they choose or as identified in an industrial award. If
you don't chose a super fund, your employer must pay your super
into a MySuper account, which has lower fees and simple features so
you don't pay for services you don't need.
Compare the default fund with at least two other funds, such as
an industry fund and a retail fund including a MySuper
You can choose a fund at any time, but you cannot make your
employer change your fund more than once a year.
If you have several super fund accounts, you can transfer the
money from each into your new fund. It saves time and money in the
long run to keep your super in as few accounts as possible.
However, check if you will lose important insurance benefits by
leaving a fund.
See Types of super funds for more
information, including MySuper accounts.
How to change super
You might want to change super funds to:
- consolidate your super into one account
- reduce fees
- invest in a fund with better services and features
- get out of a fund that has performed poorly over a 5-year
period compared to similar funds
- leave a corporate fund after resigning from your job (a
corporate fund generally only accepts contributions from the
You can change super funds by filling out a rollover form from the ATO and sending it to
your new fund or by logging on to your MyGov account. Visit
the ATO's keeping track
of your super webpage for more information.
Don't rush to change super funds if:
- your fund performed badly in a single year;- stick to judging
performance over 5 years or more
- you're chasing last year's top performing fund - it may
not perform as well in coming years.
Video: Andrew talks about changing super funds
Changing Superannuation fund video
Andrew from the MoneySmart Team has some tips about what to look
out for when changing super funds.
Before you change super funds
If you're thinking about transferring your super,
- if changing funds will affect how much your employer
- the impact on your retirement benefit if you're in a defined
- that you've notified your employer to make
future contributions to your new fund
- that you're not losing insurance benefits you want to keep
- the exit fees of your old fund
- whether your new fund charges contribution fees.
Check your life insurance cover before moving funds
If you change super funds you may not get the same death, total
permanent and disability or income protection cover that you had in
your old fund. Be particularly careful if you have a pre-existing
medical condition or are aged 60 or over. Seek financial
advice if you are unsure.
If you have been transferred automatically from your current
super fund, see Keeping track and lost
You hope to be with your super fund for a long
time. Like dating, ask lots of questions and check out all the
things that could change or go wrong before you say 'I do'.
Last updated: 12 Feb 2019