How do I choose a super fund?

Planning for a secure retirement begins with selecting a super fund that aligns with your financial goals, values, and future needs. Making the right choice can significantly affect your retirement savings. In this guide, we’ll discuss the key factors involved in choosing a super fund, from fees and performance to services and investment options, to help you make an informed decision.

Key Factors to Consider When Comparing Super Funds

Choosing a super fund isn’t a one-size-fits-all approach. By evaluating critical aspects like performance, fees, and investment options, you can find a fund tailored to your needs. Here's an overview of what to consider:

• Performance: Stability and long-term growth potential
• Fees: Impact of costs on your balance over time
• Net benefit: Performance after fees and taxes
• Investment options: Preferences for growth, balanced, control or ethical investing
• Services: Additional services like financial advice, personalised support and account management tools.  

Compare Super Fund Performance

Evaluating the long-term performance of a super fund is essential for maximising your retirement savings. Here’s how to gauge a fund’s stability and growth potential:

Review Long-Term Returns

Rather than focusing on short-term fluctuations, consider returns over a 5–10 year period.

Assess Risk Levels

Different funds have different risk profiles, so look for one that aligns with your tolerance for risk.

Annual Performance Test by APRA

The Australian Prudential Regulation Authority (APRA) conducts an annual test to identify underperforming funds. Choosing a fund that passes this test can be a strong indicator of reliability. 

Compare Super Fund Fees

Fees can have a significant impact on your retirement balance, and comparing them is essential to choosing a super fund that suits your budget. Types of fees include:

Administration Fees

Typically charged for managing your account, these can be fixed or percentage based.

Investment Fees

These fees cover the cost of managing the investment portfolio, with variations depending on the fund’s investment options.

Transaction costs

These are expenses related to buying, selling, and switching assets in a fund’s portfolio, including brokerage, settlement fees, and stamp duty. They vary based on asset types, fund activity, and chosen investment options. 

Insurance fees

These fees represent your insurance premiums and apply if you hold insurance through your super. The amount depends on your age, the type of coverage, and the level of cover selected.

Comparing fees across funds helps you find a super fund with manageable costs to maximise your savings. While fees are important, it’s also essential to consider fund performance, as together they create what’s known as the net benefit for your retirement balance.

Compare the net benefit 

The net benefit of a super fund reflects your returns after fees and costs, providing a clearer picture of your financial gain. While low fees are beneficial, they should be considered alongside performance, as a fund with higher fees but better returns could grow your retirement savings more effectively. Focusing on net benefit helps prioritise long-term growth over just cutting costs, ensuring your fund supports your retirement goals.

Compare Super Fund Investment Options

Super funds offer a variety of investment choices, each catering to different risk appetites and financial goals. These include:

Growth options

Aim for higher returns with increased risk, suitable for long-term growth.

Balanced options

A mix of growth and defensive assets offering moderate returns and risk levels.

Conservative options

Focus stability and lower risk, generally ideal for those nearing retirement.

Socially Responsible options

Focus on investments that meet incorporate environmental and social governance practices, providing options for socially conscious investors.

Direct investment options

Some super funds offer options that allow you to directly choose how your money is invested, including buying and selling investments yourself. This option is ideal if self-control is your preference. 

When choosing a super fund, it’s important to consider investment options that align with both your risk tolerance and personal values. Different super funds offer varying ranges of investment choices, from high-growth and balanced portfolios to conservative or socially responsible options. If you prefer a hands-on approach or want flexibility to adjust your investments as your financial goals evolve, look for a fund with a diverse selection of investment types. A wider range of options allows you to tailor your portfolio more precisely, ensuring it meets your needs both now and in the future.

Super Fund Services

Some super funds offer additional services, which can enhance your overall experience and ease of management of your super. Common services include:

Access to 1:1 in-person support

Some funds provide complimentary or low-cost personalised guidance with direct access to super experts. This support may cover everything from investment strategy and retirement planning to insurance assistance, ensuring members can make the best possible decision based on the valuable information they receive. 

Tools, resources and digital experience: 

Superannuation funds provide a variety of resources—such as calculators, educational webinars, fact sheets, and digital tools like mobile apps—to help members effectively manage their super. Look for a fund that empowers you with tools to learn, monitor, and optimise your superannuation easily.

Insurance options

Most super funds provide valuable insurance options, such as income protection (salary continuance) and life cover, directly within the fund. Holding insurance through super can often be more cost-effective, as funds leverage bulk purchasing power to secure competitive premiums for members. Additionally, some funds provide insurance options customised specifically to suit the needs of their members. 

Other Super Fund Benefits

In addition to the standard benefits, some funds may offer added perks like a retirement bonus, discounted health insurance and more. Keep an eye out for these extras to get the most out of your superannuation.

Tools for Super Fund Comparison

When you’re considering how to choose the best super fund, online tools and resources can be helpful. Platforms like SuperRatings provide super fund comparisons by evaluating fees, performance, and investment options. 

What to Do if Your Super Fund is Underperforming

If your fund has been classified as an underperforming fund, it’s important to evaluate your options to protect your retirement savings:

Check APRA’s Performance List

APRA regularly publishes a list of funds that do not meet its annual performance test, helping to identify underperforming options. If your fund has not met the test standards, they are required to notify you directly.

Consider Switching Funds 

If your fund consistently underperforms, you might want to switch to a more stable or higher-performing fund. Ensure you weigh all factors, including fees, performance, and investment options, before making a decision.

Comparing Super Fund Net Benefit – Example 

To understand how fees and performance affect your retirement balance, consider this example. It highlights the importance of looking at the net benefit—the return your super fund delivers after deducting admin fees, investment costs, and taxes. Rather than viewing fees and performance separately, it’s crucial to assess them together.

• Fund A: 1% annual fee, 7% average return
• Fund B: 0.5% annual fee, 5% average return
   

Over 30 years, someone investing $10,000 annually would accumulate more in Fund A despite the higher fees, due to its superior returns. When deciding how to choose a super fund, carefully consider both fees and performance to maximise your future savings.

Default Investment Option (MySuper Products)

If you don’t select an investment option when you join a super fund, you will typically be automatically invested in the default investment option known as a MySuper product. These products are standardised to offer basic features, such as lower fees and simpler investment options. While convenient, reviewing and selecting an investment option outside of the default can often provide more flexibility and higher returns, especially if you're younger and seeking growth-focused investments.

Can I Change My Existing Super Fund?

Yes, you can change your super fund at any time. If you’re unsure whether to switch, consider the following:

Evaluate Your Current Fund’s Performance and Fees: 

Are you getting competitive returns and reasonable fees?

Look for Better Investment Options: 

Some funds offer more diverse or tailored investment options than others.

Consider Your Financial Goals: 

Changing your super fund can be especially beneficial if you’re planning long-term for a growth-focused strategy, particularly when considering how to choose a super fund when you are younger. 

Changing your super fund isn’t complex, but it does require reviewing all factors to ensure it aligns with your goals.

You can switch super funds online, using the new fund’s website. You will then have to roll over your funds from your old super fund and ask them to close your account. 

Choosing the right super fund is a vital step toward a secure retirement. By evaluating factors like performance, fees, investment options, and services, you can select a fund that aligns with your financial goals. Whether you’re choosing a fund, considering a switch, or reviewing your employer’s recommendation, making informed choices today can help pave the way for a more comfortable retirement tomorrow.