If, like most people, you can choose the super fund your employer contributes to, you need to be able to compare one fund with another. At the very least, it's important to be able to compare the fund you're in now with any alternatives you may want to consider. So how do you compare super funds? To do the job thoroughly, it's a 7 step process.

Step 1: Understand the different types of funds

Broadly speaking, you join a super fund either as an individual or as a member of a group, typically through your employer. Generally, the fees for group membership are lower than for individual membership. That's because groups have greater buying power. So, if everything else is equal, your super will grow faster if you’re a member of a group.

That buying power may bring other advantages, too – like cheaper insurance premiums, automatic insurance cover without medical evidence and free access to education, advice and other member benefits.

These advantages of group membership generally apply to public sector funds, industry funds and company funds, which may be run in-house or through a master trust.

Retail funds that you join as an individual member generally have higher fees, but that may be because they offer more choices (such as a wider range of investment options) or a more expansive range of services. If those things are important to you, the higher fees may be worthwhile.

The starting point, therefore, is to understand what type of fund you’re in now, what type of fund you’re considering, and to think about what features are most important to you.

Step 2: Gather Some Personal Information

Next, you need to gather together some basic information about your current benefits. You'll find most of it on your annual member statement. You should also be able to find it on your fund's website once you're registered for online access.

The information to look for is:

  • Your current account balance.
  • The level of contributions made during the year.
  • The investment option(s) you are invested in.
  • The investment returns from those options over the past 3 to 5 years.
  • The fees you pay. These may be shown as contribution fees, member fees, administration fees, investment fees or some other name. They may be expressed as a dollar amount, or as a percentage of your account balance.
  • Your insurance cover, if any. You need to know how much, and what is covered (generally this will be death only, or death and total permanent disability, and possibly income protection as well).
  • The premiums deducted from your account to pay for the insurance cover.

Step 3: Look into the insurance

If you have insurance cover under your current fund, think about how important it is to you. If it's important, then it's the first thing you should check with any other fund you’re considering.

Why? Because the other fund may not provide the same type of insurance, or the same amount of cover. Or it may do so but only if you supply a satisfactory health statement or pass a medical examination.

If your health has deteriorated, you may not be able to get the same cover in a new fund as you have now. Even if you're healthy, filling out lots of forms and taking medical tests can be time consuming and intrusive.

So, if you want to maintain or add to your insurance cover, the first thing to do is to check whether you can and what the process is. You should also find out what premiums you would be paying, because there's a huge range between the cheapest and the most expensive.

Also, some funds offer better value to certain groups than others. In many industry funds and public sector funds, for example, older males tend to get a better deal than younger females.

Check these things with the fund or its representatives. If you get a positive answer on insurance, move on to Step 4. If you don't, it may be wise to give that fund a miss.

Step 4: Investment Options and Performance

Investment is important because, once contributions have been made and fees and insurance premiums have been deducted, it's the investment returns you earn that will decide how fast your account grows.

In your present fund, you've most likely got a variety of investment options you can choose from. The option you're in now is either because you chose it or because you made no choice and are invested in it by default.

As far as any new fund is concerned, make sure it has investment options you can understand and that suit your personal attitudes to risk and return. You should also be able to change options later on, at little or no cost.

Investment performance is obviously important, but remember that past performance is just history. It may give you some clues, but it's not a reliable guide to what's going to happen in the future.

The key is to check that the fund has a clear investment strategy, that it doesn't rely on one person or organisation to make all the decisions, and that it draws on expert advice.

Only the very largest funds have the capacity to manage investments themselves. Most use a 'multi-manager' investment process, where the fund trustee takes advice from one of the major investment consultants and spreads the assets across a range of specialist managers.

Step 5: Check out the fees

Investment returns will largely determine the size of your eventual nest egg, but fees will also have an influence. That's because every dollar that comes out of your account in fees and charges is a dollar that's not invested and growing for you.

All funds charge fees, and some types of fees are more obvious than others. Don't worry too much about fees that you're only going to incur occasionally, but do look carefully at any ongoing fees that are deducted from your account every year. Also any fee that may be deducted from contributions, or from money transferred into your account.

Step 6: Education and advice

To get the best out of any super fund, you need to make the right decisions at various stages of your membership – like whether to consolidate accounts, how much to contribute, what insurance you need, what's the best investment option and so on.

The best funds help you do that by providing education and advice in various forms. For example:

  • Does the fund provide education on superannuation and general investment issues?
  • Does it have a website that’s informative and easy to use?
  • Does it provide useful educational tools and calculators to model different scenarios?
  • Does it offer financial advice relating to your super and, if so, who pays for it?
  • Does it show you the income you can expect to end up with in retirement, and suggest actions you can take to increase it if it’s falling short of your goals?
  • Does it have good communications – booklets, newsletters, fact sheets etc?

Step 7: Think about the future

In an ideal world, the fund you choose now should still be the best fund for you throughout your working life and right into retirement. Unfortunately, it's not always that easy. Some funds provide a much better deal than others in the event of you changing jobs, or leaving the workforce for a while, or retiring.

It's a good idea to check what would happen, for example, if you were to become self employed or take a break from the workforce. Would you be able to stay in the fund, or would you have to choose a new one? And if you could stay, would the fees, investment choices, insurance cover and premiums be on the same terms as when you were an employee?

A similar question applies if you're within sight of retirement. Some funds will allow you to remain as a member when you retire, and to draw an income from your account by way of a pension. Other funds either don't have that options or charge higher fees for pension members.

Everyone's different. Some of the aspects we've covered may be vitally important to you, while others may be of little interest. Before you make your decision, think about your own priorities and give those the greatest weight.

So, if you want to maintain or add to your insurance cover, the first thing to do is to check whether you can and what the process is. You should also find out what premiums you would be paying, because there's a huge range between the cheapest and the most expensive.

Compare your super or pension fund with AppleCheck, a quick and simple web based comparison tool.


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