Having your money in the right super fund can make a big difference to the savings you have in retirement. Here we look at how to compare super funds and choose the one that’s right for you. There are a number of factors you need to consider, including:
Understanding super fund fees
The fees that super funds typically charge can include:
- Asset-based fees
- Contribution fees
- Flat dollar fees
- Transaction fees
Asset-based fees
Asset-based fees are charged as a percentage of the savings you have in your super fund. The higher your savings, the more asset-based fees you’ll pay.
For example, John has $10,000 in his super fund.
His fund charges 0.70% in asset-based fees
So his asset-based fees are 0.70% x $10,000 = $70 per year
Contribution fees
Most contribution fees are charged as a percentage of the contributions you make to your fund. Again, the higher the contribution, the higher the fee. Some contribution fees are a flat dollar fee.
For example, Jane makes a $1000 contribution to her super in one year.
Her fund charges a contribution fee of 3%.
So her contribution fee is 3% x $1,000 = $30
Flat dollar fees
Flat dollar fees are a set dollar amount that your fund charges each year to cover administration costs. This is sometimes called an administration fee, member fee or annual fee.
For example, Jack is a member of a superannuation fund that charges administration fees of $2/week.
Total fee payable for the year is $104
Transaction fees
Transaction fees are charged for any activity in your super fund account other than contributions. They include fees for:
- Entering a fund – can be up to 2.5% of your funds
- Making withdrawals - usually a flat fee per withdrawal
- Leaving a fund – can be up to 3% of your funds
- Switching between investments
Now you understand the different types of super fees, let’s look at how you compare super funds that charge different fees.
Comparing super funds fees
When comparing the fees charged by different super funds, you shouldn’t just look at asset-based fees. You need to consider the overall cost of all fees - as Hannah found out.
Case study – Comparing super fund fees
Hannah is an office manager who wanted to consolidate her super savings into one fund. But which fund? She wasn’t sure which one had the lower fees. Let’s find out.
| |
123 Personal Super Fund |
XYZ Personal Super Fund |
|
Asset-based fee
|
1.8%
|
0.8%
|
|
Admin fee
|
$0
|
$47 |
|
Contribution fee
|
3.0%
|
Nil
|
|
Insurance premiums
|
$150 p.a.
|
$90 p.a.
|
|
Adviser service fee
|
0.5%
|
Nil
|
|
Fees paid by retirement
|
|
|
| Which fund has lower overall fees? |
Assumptions
So by analysing the two funds, Hannah discovered that the 123 fund would have charged over $50,000 more in fees by retirement age. And by choosing the XYZ fund, her savings will be worth $320,762 by the time she retires - more than $70,000 more than if she'd chosen the 123 fund. The lesson - it pays to look carefully at the fees your super fund is charging.
While fees are important, so is the performance of the fund. What return are you getting each year on your savings? You need a fund that has demonstrated strong consistent performance over at least five years. Remember, past performance does not guarantee future returns.
If you’d like us to help you choose the fund, call us on 1800 046 144 or email us.
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Comparing super funds – the cost of switching funds
There will usually be charges for leaving one fund and entering another. You should be aware that switching funds may interfere with your investment strategy. You may lock in short term losses and miss longer-term gains. You could also lose other benefits like extra contributions from your employer. You need to be aware of all the facts. Your Money Solutions coach can help you
.
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Comparing super funds - Insurance
When comparing funds' insurance, you shouldn’t just look at the cost of insurance premiums. Consider the benefits and the level of cover that each fund provides. It could make a big difference to your family in if you die prematurely.
Comparing super funds - other benefits
There are some other considerations that may influence your super fund choice:
- Customer service – how helpful are they?
- Internet access – how easy is it to use their site?
- Education – are they helping you develop money skills and knowledge?
Want help choosing your super fund?
You want to choose the right super fund, but clearly it’s not a straight-forward decision. You need to consider many factors. Getting it right could mean thousands of dollars in extra retirement savings. If you’d like us to help you, please call us on 1800 046 144.
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