Four tips to prevent super earnings falling into the wrong hands

Four tips to stop your super earnings falling into a fund manager’s hands

I recently discovered that a whopping two-thirds of the investment earnings from one of my superannuation accounts had been gobbled up by administration and insurance fees. A total of $850 wiped off my nest egg! I was left with the small change of less than $400 after the fees were deducted, equal to a net return of just 0.4 per cent.

That is a woeful investment return and has made me more determined than ever to roll the super from that retail super fund into my industry super fund. The latter charged just less than $200 in total fees last year ­– a quarter of the retail fund – yet returned five times more in earnings. And yes, the balances in each fund were virtually identical.

When you are years away from retiring, it is easy to fall into a set-and-forget mentality regarding superannuation. But my example above illustrates that during the past 20 years, I have paid a price in the thousands of dollars for my inertia.

Here are a few belated lessons I learnt from reviewing my super, and which will hopefully help you take better care of your superannuation.

Roll over
As I have demonstrated above, it is pointless having money in multiple funds if one or more of them are performing badly, and stripping the bulk of your earnings to pay fees.

If you have more than one super account, check out the last couple of statements from them. They should have an ‘at a glance’ section that will tell you not only the opening and closing balance in your account, but also how much your savings earned and how much was deducted in fees and insurance premiums. You can also do this online if you have registered at your super fund’s website.

When you have compared the performance and costs of the different accounts, choose the best one and roll all your other funds into it.

This process is so simple that you don’t need to write letters, fill out and mail forms, or even make a phone call.

All you need to do is jump onto your preferred super fund’s website and click through to the section on rolling over funds. Fill in the name and the membership number of the fund you want to exit and press send. Your preferred fund will then do the rest of the work to ensure that your money is transferred.

Two things to check out first are:

  • whether you have to pay an exit or transfer fee when your money is rolled over
  • whether you are likely to lose access to any unrestricted, non-preserved amount, which you can normally withdraw, no questions asked, once you reach your individual preservation age of between 56 and 60 years of age.


If there are restrictions on accessing your non-preserved entitlement after you have rolled your funds over, you may wish to withdraw the amount before the roll over.

And the good news is that most funds will allow you to switch multiple times.

Compare
If you are still not sure which fund to preference, SuperRatings could provide some guidance. This independent research company regularly runs the ruler over more than 600 super and pension products. Its awards and rating systems are highly regarded by the industry. Each year it publishes the top 10 funds in terms of returns, fees and insurance policies. The site also provides access to considerable analysis for members.

There are also several comparison sites which allow you to see exactly how the different super funds stack up against each other. Click the Government’s MoneySmart for a list of the sites.

Beneficiaries
Another reason I am grateful that I took the time to sort out my superannuation is because I realised I had to change my beneficiary status. Having separated from my spouse some years back, the last thing I want in case I die is for my super savings to go to him.

Changing this status was as easy as clicking on the relevant page of my fund’s site, pressing ‘delete’ next to my beneficiary’s name and then filling out the names of my three children and the proportion each should receive.

But be aware that unless you specify that your choice of beneficiaries is binding, there is a chance that the fund manager will not honour your request. If you die and your preference is non-binding, then the manager needs to wait and see if a third party will make a claim on your estate, which includes your super.  The manager then decides how your money will be distributed. To make your preference binding, ask the fund to send you the appropriate form to fill in. The form needs to be witnessed by two people who are not listed as beneficiaries of your super money.

Risk appetite
By law, superannuation funds have to give members a choice on how their contributions will be invested. Up until recently, if you did not select what type of investment strategy you preferred (high-risk; high-return vs low-risk; stable-return vs growth; or defence), your money would go into a default fund. But from July this year, super funds have to transfer monies in default funds into a MySuper account. Unless you are either an aggressive investor or a passive one, MySuper accounts can give you the peace of mind of being in a low-cost fund with a simple and diversified investment strategy.

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    COMMENTS

    To make a comment, please register or login
    JO
    9th Nov 2017
    10:54am
    Host Plus
    Good returns low cost Industry Funds are best for Super in accumulation stage as well as Pension phase....
    Old Geezer
    9th Nov 2017
    12:18pm
    Hostplus is not low cost.
    Tib
    9th Nov 2017
    12:07pm
    I think it's an important point that those men who haven't updated the beneficiary status need to do that straight away. I know a lot of guys that would be rolling over in their graves at the thought of their exwife getting their super. I guess wills and the like have to be updated as well. Make sure she doesn't get a cent, bless her little black heart.
    Old Geezer
    9th Nov 2017
    12:21pm
    I've got a case at the moment where an employer hasn't put in the super for an employee so have asked the ATO to chase it up. The amount of super which was to be contributed was clearly stated on their pay dockets but was never put into super.
    Tib
    9th Nov 2017
    1:38pm
    OG that happens to a lot of people and many employees are frightened to complain because they may have their hours cut. In a lot of cases even after telling the appropriate authorities they never see the money.
    Greg
    9th Nov 2017
    6:44pm
    Same thing happened to my daughter around 12 years ago, ATO investigated and she got her super, the employer got a fine and as he was doing it to all his employees over years once he paid all the super and fines he was out of business. Ripping off kids basically because they knew no better.
    johnp
    9th Nov 2017
    12:43pm
    Have look at this link. It is terrific and can compare most managed funds and super funds for their ongoing performance etc. Usually its the industry funds that outperform.
    http://investmentcentre.moneymanagement.com.au/investments/superannuation/fund-price-performance
    Tib
    9th Nov 2017
    1:41pm
    Industry funds are by far the best,let us hope the Liberal party doesn't stuff that up as well.
    41Alpha
    9th Nov 2017
    1:09pm
    I'm with HESTA super fund. They some how 'loose' funds that I , on occasion, transfer into my account from my bank.
    It's becoming a joke, any one recommend a Good Super Fund ?
    Old Geezer
    9th Nov 2017
    2:51pm
    SMSF
    Retired Knowall
    9th Nov 2017
    6:05pm
    REST
    KB
    9th Nov 2017
    2:54pm
    I do not have super My daughter was shocked at how much they took out IN FEES .Not much left at all in her old super account from her very first job
    floss
    9th Nov 2017
    4:37pm
    For most working people a Industry Fund is the way to go ,just hope this useless Fed. Gov . doesn't let the big end of town muscle In on them.
    JO
    9th Nov 2017
    5:34pm
    Money Magazine
    Best of the best 2015
    Hostplus
    Indexed Balanced Product - Lowest cost balanced super fund
    We have just assessed for our pension management and their Indexed Balanced Fund Fund low cost and good return
    JO
    9th Nov 2017
    5:38pm
    Scott Pape (Barefoot Investor) : Likes Hostplus Balanced Index Fund

    "The cheapest fund is the Hostplus Balanced Index Fund,
    which charges an administration fee of $1.50 a week,
    and an amazing 0.02% in fees for a balanced mix of
    Aussie shares, international shares, fixed interest and
    cash."