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Choosing a super fund is a bit like dating. Pick the right fund and you'll be set for a long, happy and comfortable life when you retire. Set your sights on the wrong one and you're in for a world of pain. (ATO, 2016)
There are a few things you need to know when choosing a super fund. It is important to do some research and ask around before you commit to your chosen fund.
1: Compare Fees
Obviously there are going to be fee's involved with maintaining a super fund, so carefully consider the cost of each option and what you get for your fees.
There are many different types of fees associated with your super fund that should be considered. Fees are typically deducted from your account at the end of each month or when an action is taken. Super fees can be either a dollar amount or a percentage.
The main types of fees are:
Member Fees: General administration fees to cover the cost of keeping your super account.
Management of Investment Management Fees (MER): Fees for managing your investment which can vary for different investment options.
Contribution Fees: Fees to cover the administration expense of receiving and investing your contributions.
Adviser Service Fees: Fees for personal advice provided about your super and other investments. Your adviser may also receive commissions for certain investments that they recommend to you.
Insurance Premiums: The cost of insurance provided through your super fund. Many super funs have a set default insurance option. You can usually choose to lower or increase your level of cover based on your needs.
"A 1% difference in fees now could be up to a 20% difference in 30 years."
2. Investment Options
Before choosing a super fund, make sure you assess the super fund's investment options. You will need to ensure they have the right choices for your needs and the level of financial risk you want to take to reach your retirement goals.
When choosing a super fund, look at the fund's performance over at least the last five years. It is important to look at long-term performance to truly gauge the success of your chosen fund.
The reality of insurance, and getting yourself comprehensive coverage for most of life's unplanned situations is that it can be expensive. So when it comes to your insurance, it is great to have the option to take out some of your insurance cover through your superannuation, rather than have the premium deducted from your income. The three main types of Insurance that Super Funds offer are Life Insurance, Total and Permanent Disability, and Income Protection Cover. If you're wanting to review your insurance, check what cover is available through your super fund, so you can start comparing policies. To assess the pro's and con's of insurance through super, read our blog post here.
Depending on the super fund, they may offer extra services to be tailored to your superannuation goals and financial situation. These may include financial planning or recommended financial services like banking and types of insurance. These extra service's can normally be found on the super funds website.