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Product

AMP SignatureSuper

Past 5-year return
New

% p.a

FYTD return

-0.06

% p.a

Company
Calc fees on 50k

$738

Features
Advisory services
Death insurance
Income protection
Online access
Term deposits
Variety of options
SuperRatings awards
SuperRatings Platinum 2022 MyChoice Super
Go to site
Product

LGIAsuper - Accumulation Account (Retained Benefits)

Past 5-year return
7.57

% p.a

FYTD return

0.73

% p.a

Company
Calc fees on 50k

$530

Features
Advisory services
Death insurance
Income protection
Online access
Term deposits
Variety of options
SuperRatings awards
SuperRatings Platinum 2022 MyChoice Super
Go to site

Diversified Growth

Product

MLC MasterKey Business Super

Past 5-year return
7.78

% p.a

FYTD return

1.26

% p.a

Company
Calc fees on 50k

$928

Features
Advisory services
Death insurance
Income protection
Online access
Term deposits
Variety of options
SuperRatings awards
SuperRatings Platinum 2022 MyChoice Super
Go to site

Horizon 4 - Balanced Portfolio

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What is a superannuation fund?

A superannuation fund, or super fund, is money in an account that has been put aside by your employer over your working life for you to live on when you retire from work. That account is either held with a super fund or self-managed, and invested to assist in your retirement income. 

The money is only able to be accessed in certain circumstances, the main one being when you retire. The more super you are able to save over your lifetime the more money you will have when you retire to support you. 

In Australia, a super fund is generally built from contributions that your employer makes on your behalf into the account. This is a percentage on top of your salary and there are laws about how much your employer must pay. 

The government may also add to your super fund up to a certain amount. You can also opt to make additional super contributions and salary sacrifice additional funds into account to increase your retirement savings. 

Generally, your employer must pay super for you if you are:

  • 18 years old or over, and are paid $450 or more (before tax) in a calendar month
  • under 18 years old, being paid $450 or more (before tax) in a calendar month and work more than 30 hours in a week.

You are entitled to super if you work casual, part-time or full-time hours and you have temporary or permanent resident status. You may also be eligible for super if you are a contractor who is paid primarily for labour, even if you are paid through an ABN, and you should consult a financial adviser for personal advice to match your personal circumstances.  

Why is it important to compare super funds?

There are many different factors to consider when choosing the best super fund for your financial situation. Those factors also make it important to keep on top of any changes and regularly review your super account. New legislation was passed in 2021 which has made it harder for super funds to underperform, but there are still some funds that are top-performing, and some may offer better member services for your situation than others.

When comparing a super fund you may want to look at any ongoing fees and also at its past performance over the last few years. The super balance that is held in your fund is invested and because of this there is a difference in how well it may perform between funds. You can make your own decisions on how you want the money invested, or you can choose to let your fund decide, but it’s important to make sure you stay on top of any developments in the industry and also keep an eye on how your fund is performing. 

What types of super funds are there?

There are five basic super funds:

  1. Retail: Retail funds are run by banks and other financial institutions and are open to any investor. Retail funds often offer a wide range of investment options. Most retail funds are medium or high cost, although some may offer a low-cost option that reduces the fees paid. They are usually accumulation funds, and the company running the fund retains some profit.
  2. Industry: Industry super funds were once created to cater to workers in single industries who worked across multiple job sites, but have since become open for anyone to join. They will have fewer investment options than retail funds, but will usually meet the majority of people’s needs in their pre-selected investment options. Some bigger funds have begun offering more bespoke options, including shares, ETFs and term deposits. Because industry funds are run not-for-profit they are usually low cost. Most are accumulation funds. 
  3. Public sector: Public sector funds are another superannuation fund that were originally created for certain workers, in this case, federal and state government employees. Now, some public sector funds are open to anyone. They usually have a limited number of investment options, low fees and are run not-for-profit which makes them a good option for members. Public sector funds were originally begun as defined benefit products, which means your return was based on a formula rather than performance, but this has changed for new members. 
  4. Corporate: Corporate funds are offered by some large companies for their employees. Some operate the fund under a board of trustees while other, smaller corporate funds may operate under a large retail or industry superannuation fund. They are usually low to medium cost with big benefits for members. 
  5. SMSF: Self Managed Super Funds (SMSFs) are for people who wish to be able to invest their superannuation however they like. This can be done individually or with family members or a partner, but there are restrictions on how many people can be involved. All members must be trustees (or directors if there is a corporate trustee) and are responsible for all decisions made about investments and compliance with relevant laws. SMSFs are usually chosen by wealthier Australians as the set-up costs and administration fees can be very high in the first few years, but for some DIY investors, there is more peace of mind in having total control over your future retirement fund. It’s worth remembering though that your superannuation fund is essentially going to help you have a comfortable retirement, so embarking on a SMSF isn’t a decision to be taken lightly. 

What is a MySuper fund?

MySuper is an initiative brought in by the Australian Government in 2012 which created simple and cost-effective default superannuation products for Australian workers. A MySuper fund is a basic fund that has no unnecessary features and a restriction on the fees which can be charged. Employees who have not selected a super fund are automatically assigned a MySuper product. 

All MySuper funds are only allowed to charge certain fees, which include administration and investment fees, and are capped. Investment switching, exit fees and contribution splitting fees are also restricted. 

MySuper funds must also offer a basic level of life insurance and total and permanent disability cover on an opt-out basis. MySuper products also offer only one investment option.

How do you compare super funds?

In addition to deciding what type of fund you will use there are an assortment of other considerations that should go into your superannuation fund selection process. 

Fees

As most super funds are accumulative, fees and charges can make a significant impact on your savings over time and undo a lot of the hard work you have put in building your nest egg. 

There are a number of fees that are common when it comes to superannuation accounts. These include account management fees, which cover the cost of administration etc, and investment fees. 

Depending on your fund you may also pay fees for financial advice and potentially fees for changing investments, and you may also pay fees for withdrawing from your fund or changing providers. When comparing superannuation funds, it’s important to look at the percentage of fees you will be paying and how this will impact you in the long run. 

Investment options

Different types of super funds will give you different investment options. Some funds may have very limited investment options, while others may let you completely tailor your investment strategy. If you have a lot of existing knowledge and have an idea of what kind of strategy you would like your superannuation to be invested towards, this might be something to consider when selecting a fund. If you’re happy to let someone else take the wheel, this comparison may be less important for you. 

Investment performance

After fees, a fund's performance is one of the more important things to consider between super products. The government recently cracked down on underperforming funds, but it’s still important to check the history of your fund. Reviewing the last couple of years of performance obviously isn’t a guarantee of what the result will be in coming years, but it is a good way to check your fund is tracking alongside, or above, other funds. Investment performance will make a significant impact on your account balance so it's something to be very aware of. 

Insurance

Super funds may offer insurance cover that will pay out if you die, experience permanent disability, or provide income protection. It’s important to compare these policies, checking the insurance premiums, coverage, and exclusions to make sure they’re right for you.

Customer service

Your superannuation fund is one of the most important investments you will ever have, so it’s important to be with a fund that provides everything you need. This includes good customer service. If you ever have any questions or concerns about your fund, you want to be able to rely on the customer service of the fund you have chosen to support you, so look at reviews and other members’ thoughts before you select a fund. 

You will also want to compare how easy processes are before you select a super product, including nominating the fund when you start a new job and adding additional funds to your retirement savings.

Compare super providers

Does the government help you compare super funds?

As part of the Federal Government’s crackdown on superannuation, it introduced the YourSuper comparison tool, which will help you compare MySuper products and choose a super fund that meets your needs. It was introduced on 1 July 2021 and is regularly updated to include the latest data. 

The YourSuper comparison tool shows a table of MySuper products ranked by fees and net returns and allows you to select and compare products. 

The information displayed in the comparison tool is collated and supplied by the Australian Prudential Regulation Authority (APRA) so you can be sure it’s approved and correct.

What is a superannuation fund?

A superannuation fund is an institution that is legally allowed to hold and invest your superannuation. There are more than 200 different superannuation funds in Australia. They come in five different types:

  • Retail funds
  • Industry funds
  • Public sector funds
  • Corporate funds
  • Self-managed super funds

Retail funds are usually run by banks or investment companies.

Industry funds were originally designed for workers from a particular industry, but are now open to anyone.

Public sector funds were originally designed for people working for federal or state government departments. Most are still reserved for government employees.

Corporate funds are arranged by employers for their employees.

Self-managed super funds are private superannuation funds that allow people to directly invest their money.

How do you open a superannuation account?

Opening a superannuation account is simple. When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You might want to provide your tax file number as well – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

What fees do superannuation funds charge?

Superannuation funds can charge a range of fees, including:

  • Activity-based fees – for specific, irregular services, such as splitting an account after a divorce
  • Administration fees – to cover the cost of managing your account
  • Advice fees – for personal investment advice
  • Buy/sell spread fees – when you make contributions, switches and withdrawals
  • Exit fees – when you close your account
  • Investment fees – to cover the cost of managing your investments
  • Switching fees – when you choose a new investment option within the same fund

What superannuation details do I give to my employer?

When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You should also provide your tax file number – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

How do I set up an SMSF?

Setting up an SMSF takes more work than registering with an ordinary superannuation fund. 

An SMSF is a type of trust, so if you want to create an SMSF, you first have to create a trust.

To create a trust, you will need trustees, who must sign a trustee declaration. You will also need identifiable beneficiaries and assets for the fund – although these can be as little as a few dollars.

You will also need to create a trust deed, which is a document that lays out the rules of your SMSF. The trust deed must be prepared by a qualified professional and signed by all trustees.

To qualify as an Australian superannuation fund, the SMSF must meet these three criteria:

  • The fund must be established in Australia – or at least one of its assets must be located in Australia
  • The central management and control of the fund must ordinarily be in Australia
  • The fund must have active members who are Australian residents and who hold at least 50 per cent of the fund’s assets – or it must have no active members

Once your SMSF is established and all trustees have signed a trustee declaration, you have 60 days to apply for an Australian Business Number (ABN).

When completing the ABN application, you should ask for a tax file number for your fund. You should also ask for the fund to be regulated by the Australian Taxation Office – otherwise it won’t receive tax concessions.

Your next step is to open a bank account in your fund’s name. This account must be kept separated from the accounts held by the trustees and any related employers.

Your SMSF will also need an electronic service address, so it can receive contributions.

Finally, you will need to create an investment strategy, which explains how your fund will invest its money, and an exit strategy, which explains how and why it would ever close.

Please note that you can pay an adviser to set up your SMSF. You might also want to take the Self-Managed Superannuation Fund Trustee Education Program, which is a free program that has been created by CPA Australia and Chartered Accountants Australia & New Zealand.

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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