How to Change Super Funds? A Guide
When it comes to retirement, being prepared is a must. If you want your savings balance at retirement to be high enough to last, you have to take the appropriate steps. To make sure your super balance is right, you may be considering changing super funds. If that’s the case, don’t worry! You aren’t alone.
In this article, we’re going to provide you a simple step by step guide for changing your super fund. Keep reading to find out everything you need to know about changing your super fund!
Here’s What We’ll Cover:
What’s a Super Fund?
An Australian super fund is a long-term investment that grows over time. Its formal name is the superannuation fund, but most people just call it the super fund. When it comes to picking, there isn’t a one-size-fits-all Australian superannuation fund. There are many different investment options available, and it takes time to determine which is right for you.
Reasons to Change Your Super Fund
There are a few reasons that you may need to change your fund. Among them, these are the most common:
- You chose your current fund with no previous knowledge
- Your investment performance is down, leading to less money in your accounts
- Your super fund details have been reviewed by a financial adviser, and you’ve been advised to change
- The investment portfolio for your fund doesn’t reflect your wants or beliefs
If any of these reasons match your current scenario, it may be time to change funds.
How to Change Super Funds in 8 Steps
If you’re ready to change funds, these are the 8 steps you need to take into consideration. These will help you pick the right fund for your future.
Step 1: Choose Between an Industry Fund and a Retail Fund
This decision will affect the money that your super fund incurs. The biggest difference regards what happens to the profits that each fund makes.
- Industry funds are ‘profit to member’ organisations. This means that profits are returned to members rather than shareholders.
- Retail funds are run by businesses in the financial sector. This means that profits are disbursed to shareholders rather than members.
At this point in time, more than 5 million Australian workers belong to an industry fund. These Australian funds are often regarded as the best super funds for individuals.
Step 2: Consider Long-Term Performance and Investment Returns
Long-term performance is related to both past performance and future performance. Understanding how a super has performed over a period of time gives you an idea of how it will continue to perform. You can also review the average returns received by members. A super fund that has a history of higher returns means that you’ll likely earn more for your retirement.
Super fund returns should be viewed as the net benefit, however. This is your investment returns minus any administrative or investment fees. This is the money you’ll actually pocket when all is said and done.
Step 3: Know How Your Funds are Invested
Investment earnings are highly important in your super. They’re what’s going to give you security when it comes time to retire. Understanding the investment strategy being used for your fund is crucial. If you can’t pinpoint the actual investment being made, then the super may not be for you. Be sure to review the super investment terms before getting signed up.
Step 4: Understand the Fee Schedule
Any fees being taken out are going to make an impact on your bottom line. The last thing you want is to be paying fees through your new super that net you less benefits than your previous super. Fees may be flat, meaning that you'll always pay the same amount. Some may be percentage-based, meaning it depends on how much money you have.
Be cautious, and pick the super with the right fee schedule for your needs. If you’re looking to make sure the fee schedule fits, refer to your accounting software. This can help you adequately budget, making sure you can afford your new super fund.
Step 5: Look Into the Provided Insurance Coverage
Having the right insurance coverage matters. Most funds offer at least some basic insurance cover. In fact, nearly three-quarters of all Australians get their life insurance covered through their super fund. When considering a new fund, make sure that the benefits of insurance cover offered are comparable, and that the premiums are, too. You don’t want to pay more for insurance cover if it means less retirement savings in the long run.
Step 6: Look Into Funds that Offer Assistance
Many super funds are hard to navigate on your own. Often, their terms can be complex, and it’s hard to know if you’re making the right decisions financially. Some super funds offer professional advice and financial advice when you’re a member. This can make a huge difference when you’re looking to make these large decisions.
Step 7: Make Sure the New Fund is Work Compliant, and Notify Them
Some employment requires that you use a certain fund. If you’re concerned that this applies to you, make sure to check your contract. If you need to double-check, be sure to speak with your employer, unless you’re self-employed. Losing benefits, or being penalized at work, may cause bigger issues in the long run.
While you’re consulting with them, if everything is clear, notify them that you’re changing funds. This way they’ll pay into the correct account moving forward.
Step 8: Combine Your Super Funds
The last thing you need to do is combine your super funds. Every year, many people forget to do this step, and billions of dollars are lost, or go unclaimed. The biggest benefit to combining is the ability to avoid higher fees. Multiple funds means multiple sets of fees. In the long run, that means much less money for retirement. If you’re changing super funds, do not forget to combine funds. You may lose more than you anticipate if you do.
Changing super funds seems intimidating. Thankfully, the process is rather easy. From beginning to end, you can change super funds in 8 simple steps. Just be sure to give yourself the time to review the options that you have and make sure that switching is worthwhile. The last thing you want to do is lose money that should be going towards your retirement.
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