If you’re juggling multiple superannuation accounts, you’re not alone. Many Australians unknowingly hold more than one super account, often as a result of changing jobs or not consolidating their funds over time. While it might not seem like a pressing issue, combining your super accounts could simplify your financial life and even save you money in the long run. That said, it’s a decision that requires careful consideration.
Here’s an in-depth look at the pros and cons of consolidating your super accounts and what you should keep in mind before taking the plunge.
The Pros of Combining Multiple Super Accounts
- Simplified Management
Managing multiple super accounts can quickly become complicated, with paperwork and statements piling up from different funds. Consolidating your accounts into one streamlines your finances, making it easier to track your retirement savings, investment performance, and contributions. With just one account, you can spend less time on admin and more time focused on your financial goals.
- Reduced Fees and Costs
Each super fund comes with its own set of fees—administrative fees, investment fees, and insurance premiums. These fees can significantly erode your retirement savings over time if you’re paying them across multiple accounts. By consolidating accounts, you eliminate duplicate fees, potentially saving you hundreds or even thousands of dollars annually.
- Investment Strategy Alignment
Your super is one of the most critical investments you’ll make in your lifetime. With multiple super accounts, it’s easy to lose sight of how your funds are allocated. Rolling your super into one account allows you to align your investments with your goals, risk tolerance, and retirement timeline. This focus often translates into better-managed investments tailored to your unique situation.
- Long-Term Financial Planning Benefits
Having all your super in one place gives you a clearer picture of your retirement savings, making it easier to set and achieve long-term financial goals. It also simplifies forecasting for your retirement needs, ensuring you stay on track to enjoy a secure and comfortable future.
- Potential for Stronger Negotiating Power
When your super is consolidated in a single account, larger balances can sometimes give you access to lower fees or exclusive investment opportunities. Certain funds reward account holders with reduced costs or additional features, which are only available at higher account thresholds.
The Cons of Combining Multiple Super Accounts
While consolidation has many benefits, it’s not without its downsides, and there are certain risks to consider.
- Loss of Insurance Benefits
One of the most significant pitfalls of consolidating super accounts is the potential loss of insurance coverage. Many funds include default insurance—such as life, total and permanent disability (TPD), and income protection cover. If you consolidate accounts, any existing insurance linked to the accounts you’re closing may be cancelled. Before consolidating, check whether your insurance coverage can be transferred or replaced at a reasonable cost.
- Exit Fees and Transfer Costs
Although exit fees for super funds were banned in Australia in 2019, there may still be other costs associated with leaving a fund, such as early termination penalties for certain investment options. Ensure you understand any fees or financial implications of transferring your funds.
- Potential Tax Implications
Transferring your super across different funds could trigger tax implications, depending on the circumstances. For example, you may end up paying tax on certain contributions or lose tax benefits tied to a particular fund. Speak to a financial adviser or tax professional to better understand how consolidation might impact your tax responsibilities.
- Limited Access to Unique Investment Options
Some super funds offer exclusive investment choices that may not be available elsewhere. By leaving a fund, you might forfeit access to high-performance portfolios, ethical investment options, or other unique offerings. Be sure to weigh up what you might lose in the process of consolidating accounts.
- Eligibility Requirements and Red Tape
Consolidating your super isn’t always as simple as clicking a button. Certain funds have eligibility requirements, unique processes, or even restrictions on transfers. Make sure you fully research your existing funds and understand the steps involved in executing the consolidation process.
How to Consolidate Your Super Accounts
If the pros outweigh the cons and you’ve decided that consolidating your super accounts is the right move, here’s how to go about it:
- Locate Your Super Accounts: Use the Australian Taxation Office’s (ATO) online services through MyGov to see a full list of your super accounts, including any lost or unclaimed super.
- Review Each Fund’s Features: Analyse your accounts to determine which fund is the most beneficial to keep. Consider fees, performance, insurance, and investment options.
- Check for Insurance Coverage: Before consolidating, ensure that your insurance needs are covered in your chosen fund, or seek alternative coverage to maintain adequate protection.
- Inform Your Employer: Once you’ve chosen a fund, notify your employer of your super details to ensure your future contributions go into your consolidated account.
- Use Online Tools to Combine Accounts: Many super funds and the MyGov platform allow you to consolidate your accounts online in just a few clicks. Follow the prompts and provide the required details to finalise the process.
- Stay Engaged with Your Super: After consolidation, regularly monitor your account to ensure it’s performing as expected and remains aligned with your financial goals.
Making the Right Choice for Your Future
Combining multiple superannuation accounts can be a smart financial move, but it’s not right for everyone. The best choice depends on your unique financial situation, your insurance needs, and your retirement goals.
Need more help determining the right course of action? Speak to a licensed financial adviser who can guide you through your options and help you make an informed decision.
Taking control of your super today could make a world of difference for your financial wellbeing tomorrow. Is it time to simplify and consolidate your super?
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.