More than one super account? You’re likely losing money
If you are like me, you probably feel that it will be two lifetimes before you can access your super. However, that doesn’t make your retirement savings something you should ignore. If you are guilty of collecting multiple super funds over the years, chances are that some of Australia $17b in lost monies could be yours.
Your Superannuation is likely to make up a significant chunk of your future retirement nest egg, so it’s vital you get your super in order as early as possible to maximise your investment. Your future self will thank you.
Consolidating your multiple and often long-forgotten super accounts into one can have a range of benefits. Not only does it help make managing and monitoring your super more simple, but in most cases, will save you a small fortune between now and your eventual retirement. By failing to consolidate multiple super accounts, you risk eroding your balances by paying multiple fees and charges.
So where should I start looking for lost funds?
The easiest place to start is via the MyGov website. Once you are logged in, you’ll need to link your account to the Australian Tax Office (ATO). Once linked there is a section which lists any superannuation accounts known to belong to you. There is also a feature that enables the ATO to consolidate your superannuation accounts for you.
Are there any reasons why I may not want to consolidate my super?
Yes! Before you consolidate or close a superannuation account it is essential to ensure that you won’t lose any features or benefits that would be worth keeping that you won’t be able to get back if once the account is closed.
This could be a unique feature that is only available to members of a specific industry or other groups. This can range from discounts on home loans with certain banks through to defined benefit funds.
The most common benefit lost when closing or rolling over accounts is the insurance benefits. It is vitally important to make sure you have the correct level and type of covers in place before making changes. Otherwise, you risk not being able to get replacement cover, or you may only be able to obtain cover with exclusions or other changes applied due to your medical history.
We recommend getting professional and personalised advice when organising your personal insurances.
Your consolidation checklist
Once you’ve identified all of your superannuation accounts, it’s time to start comparing them. You can find the information you need by looking at your super statement and reading the relevant Product Disclosure Statement. Alternatively you can call your super fund directly to find out the following.
Fees: Superannuation fund fees can range from a single fee through to multiple. They are typically a combination of both fixed fees and percentage-based. The most common types are:
- Member fee: Usually a flat $ fee per month.
- Admin fee: Can be either a % fee based on your account balance or a flat $ fee each month.
- Investment option fee: This is often called an “MER” and is the fee for your chosen investment option. e.g. “MySuper Balanced Option.” This is a % based fee and varies wildly based on the investment option selected. You could have a low fee super fund, but be invested in a high fee option.
Always ask your fund if any other fees apply such as performance, exit/withdrawal fees or switching fees.
When you assess the fees, remember to consider your combined superannuation account balances as a %. An account balance of $10,000 paying $300 per year in fees may seem low but works out to be 3% in fees, whereas an account balance of $100,000 paying $1,500 in fees which in $ terms is 5 x higher, is actually lower at 1.5%.
Performance & Features: Once you understand what fees you are paying, it’s also important to assess other aspects such as the range of investment options or track records of investment returns. Just remember that past performance and investment returns are no guarantee of future returns. Most super funds will display the returns for each of their investment options for the following periods – past 12 months, 3 years, 5 years and 10 years and so on.
You may also want to have access to ethical or responsible investment options, and not all funds offer these.
Just like with fees, it’s important to make sure you are making a like for like comparison. The returns for a “Balanced fund” will be different from the returns for “Growth fund” as they will each have different investment strategies.
Insider tip: Some super fund investment options are NOT true to label. It’s big business to have the best performing “Balanced” option. Most people would think that a “Balanced” fund would “balance” their investment mix between defensive assets like cash, bonds and term deposits with growth assets such as shares and property. A sneaky trend in the industry to boost investment returns is to have sometimes less than 10% in defensive assets and +90% in higher-growth assets, but to still called it a “Balanced” option.
It’s important to ask or look at the PDS for what assets make up your investment option to know whether it is true to label.
Lastly, ask your fund if they offer any additional benefits as a result of having your super with them.
Once you’ve looked into the above you’ll get a firm idea as to whether you feel comfortable making the decision to consolidate your super funds yourself, or whether some professional advice may be needed to help guide you, or whether you simply wish to outsource that role to someone more familiar with the process.
Summary
For most of us, the advantages of having a single superannuation account are clear. Once you have investigated the risks and benefits (or outsourced that to a professional advisor) you should make sure to let your employer if you have changed your superannuation fund otherwise you may end up creating another account that you will need to consolidate once again.
This article is general advice only. We don’t know your individual circumstances. If you wish to get personal advice that takes into account your particular situation, please seek professional advice from a qualified and licenced advisor.