Choosing the right super fund is a crucial decision that can significantly impact your financial future. With over 425,000 young professionals entering the workforce in Australia each year, understanding how to make informed choices about your super is more important than ever.
What is Superannuation?
Superannuation, commonly referred to as “super,” is a way of saving for retirement. Your employer pays a percentage of your salary into a super fund, which then invests this money to grow your savings over time.
Why Choosing the Right Fund Matters
The superannuation fund you choose will influence how much money you’ll have when you retire. Factors such as fees, investment options, and performance can vary significantly between funds, affecting your long-term savings.
1. Understand the Types of Super Funds
Retail Funds
- Pros: Wide range of investment options, flexible.
- Cons: Generally higher fees.
Industry Funds
- Pros: Lower fees, no shareholders, good performance track record.
- Cons: Fewer investment choices compared to retail funds.
Wrap Platforms
- Pros: Comprehensive reporting, access to a wide range of investment options, personalised investment strategy.
Cons: Reliance on financial advisers to manage and operate effectively.
Corporate Funds
- Pros: Tailored benefits for employees, potentially lower fees.
- Cons: Limited to employees of the corporation.
Self-Managed Super Funds (SMSFs)
- Pros: Full control over investments, tailored strategy.
- Cons: High responsibility, costly to manage, requires significant time and knowledge.
2. Evaluate Fees and Charges
High fees can erode your retirement savings over time. Compare the fees charged by different funds, including:
- Administration Fees: Charged for managing your account.
- Investment Fees: Charged for managing your investments.
- Insurance Premiums: Deducted for any insurance cover within the super.
3. Review Investment Options
Consider how your super is invested. Some funds offer a range of investment options, from high-risk, high-return investments to more stable, low-risk options.
Investment Strategies
- Growth: Higher risk, higher potential return.
- Balanced: Medium risk, balanced between growth and stability.
- Conservative: Lower risk, focused on preserving capital.
4. Check Performance Track Record
Past performance can give you an idea of how well the fund has managed investments. However, remember that past performance is not a guarantee of future returns.
5. Consider Insurance Options
Many super funds offer insurance, including life cover, total and permanent disability (TPD) cover, and income protection. Check what insurance is included and if it meets your needs.
6. Read Reviews and Seek Professional Advice
Before finalising your choice, read reviews and ratings of different super funds. Consulting a financial adviser can also provide personalised advice based on your situation.
Choosing the right superannuation fund is a vital step towards securing a comfortable retirement. By understanding the types of funds, evaluating fees, reviewing investment options and performance, considering insurance, and seeking professional advice, you can make an informed decision.
Ready to take control of your super? Start by researching and comparing funds today. Your future self will thank you!
If you would like to improve your current investment strategies or are looking to start your investment journey, click here to organise a complimentary 20-minute phone call with an EPG Wealth adviser.