Fund Choice in Superannuation

Australian workers are increasingly taking an active interest in their retirement savings and are faced with having to evaluate their current fund and make a decision to stay or instruct their employer to make a change. So what are the key points to consider when reviewing and assessing funds?

Super funds come in various sizes and types making it a challenge to compare funds. A vast selection covers retail, corporate, self-managed, master trusts and industry funds. To help make your decision easier we consider the factors that are probably the most critical to making the right choice of super fund.

What to look out for in choice of fund

Range of investment options choice

When looking at the range of investment options it is important to discuss with your adviser the applicability of the available investment options to your risk profile and desired investment strategy. In doing this it is important to look at the net result to you. This includes looking at the net result after fees and other costs and benefits including insurance cover. Your adviser will be able to work with you to ensure that you have the best strategy and underlying fund managers to maximise the probability of you achieving your lifestyle goals.

Investment performance choice

As investment returns can be reported differently by super funds the return allocated to your account after all fees and charges have been deducted is what you should focus on. This is referred to as the crediting rate and is simply defined as what has actually been deposited into your account. Also many funds have a smoothed crediting rate which means that the return to your account is reduced in strong performance periods and then applied when performance is weaker. This makes direct performance comparisons less useful and must be considered when assessing options. It is important that you ensure that the underlying managers are suitable for your investment strategy and your adviser can provide assistance in this regard.

Low cost structure choice

Paying higher fees does not buy you better investment returns but it may buy you more flexibility and additional benefits or services. The main types of super fund fees you should be aware of are contribution fees, exit fees, ongoing fees, member fees and investment fees. Remember that investment returns deposited to your super account have all fees deducted so reasonable fees will ensure you are left with more money for your lifestyle goals. More expensive fees will mean your investment will have to achieve higher returns in order for you to achieve the same amount of investment earnings.

Adequate insurance cover choice

We encourage you to pay attention to the insurance component of your current fund and any prospective new fund you may consider switching to, as you could end up with more insurance or less insurance than you need and possibly even no insurance at all. This is more likely if you opt out of a fund that is used collectively by a large number of employees. These groups tend to attract lower premiums and an automatic acceptance level ensuring that every employee will get a general level of cover providing they are all part of the same fund.

Extra benefits and services choice

This includes newsletters, web services, multiple account types and financial planning services amongst other additional features.

How we can help by Providing Super Fund Choice Solutions

Super fund choice may provide an opportunity for you to better achieve your desired financial goals. However, the wrong choice might mean that you receive substantially less benefits in the long term. If you would like more information on fund choice or like advice from an advisor to ensure you have the best plan for your future needs simply follow this link: Enquiries and mention "Fund Choice".

Source: Personal Wealth

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