The new year is the perfect time to get your financial affairs in order.
You probably have some time off work and might be less than satisfied with the way your fund handled the financial fallout of the COVID-19 pandemic.
There are, however, a few things that you need to consider before jumping across to a new super fund, especially if you don’t want to jump out of the frying pan and into the fire.
It isn’t a matter of looking at just one indicator, you will need to take a much more holistic approach when you are looking for the right fund to switch to, weighing up fund performance and fees against other important considerations.
Make sure you are comparing apples with apples.
Firstly, make sure that you are comparing a balanced option against another balanced option, assuming that you are happy to stay with the same risk profile you adopted when you first chose your super fund.
Even if you do decide to compare across different investment options, make sure you look at the investment performance across the same time period.
When it comes to selecting time periods you should usually look at the performance over at least five years, to ensure you have a clear picture. Given the nature of 2020, your fund may have suffered one bad year, but when you look at its five-year performance, you may be better off sticking with what you have.
Professor Helen Hodgson, a tax expert from Curtin Law School, told Business Insider Australia: “The biggest erosion of superannuation account balances comes from fees and charges.
“The PDS (product disclosure statement) for the fund should set out what the current fees are, but check for indirect fees on investment balances as well as account administration fees.”
Superannuation fees are either a dollar amount or a percentage or both. Either way, the lower the fees, the better.
Super funds typically have three types of insurance for members:
- life (also known as death cover)
- total and permanent disability (TPD)
- income protection
When comparing the default insurance offered by super funds, look for:
- the premium rates
- the amount of cover
- any exclusions or definitions that might affect you
Some of the other things you may like to consider are the services offered by the funds you are comparing, such as financial advice, etc.
You can also investigate if your fund allows you to have a mix of investment options, with a different weighting between growth, balanced, cash or property. There are also funds that offer ethical investments only, which may be something that is important in your investment strategy.
Have you ever switched super funds? What were the important factors behind making your decision?