Hi, well today we are talking how to choose the most suitable super fund for you.
Let's be honest, what we really want from our super fund is: the lowest fees, best returns with minimum risk,
a super fund that looks after our interests as members and provides us with a free advice.
Well sorry to disappoint you but none of the super funds do that.
So unfortunately, as with anything else in life, to make a good choice you will need to do a little bit of work and research.
But I'm here to help you, to give you some suggestions how to make this process much easier.
But first, let's start with the most important thing about superannuation in Australia, which I can see, is still quite a confusion.
From 1st January 2021 the Super Choice law was extended giving more Australians ability to choose their own superannuation fund,
so you no longer are locked into your employer's super fund.
So every employer needs to offer their employees a CHOICE OF FUND.
I will leave the link to the tax office page where you can find more information about that decision.
There are lots of videos and articles you can find that give information about "the best" super fund,
but mainly what I see is the advice to choose the fund based on level of fees and
well.. what the government has been advertising, based on performance.
As important as those two are, there is no such thing as "the best" super fund.
There are over 500 superannuation funds in Australia and thousands of different investment choices,
so choosing one, can feel like a daunting task.
Choosing the super fund that will best suit your needs, as I said before, is pretty complex and requires a bit of work on your part,
so I will go over the steps that I take when choosing and recommending a fund to my clients.
My name is Katherine from About Retirement, I am a certified financial planner and
with my videos I really want to help you feel more comfortable with your financial decisions,
which in turn will allow you to create financial freedom and security for you and your loved ones.
If you find this video of value please click that LIKE button and SUBSCRIBE to my channel.
I will keep on bringing you more and more value every single week.
Also leave questions and comments below this video.
So first let's go over the types of superannuation funds that you can choose from because this is quite important.
1. RETAIL FUNDS
Those are funds run by financial institutions. They are generally open to anybody.
The general belief about the retail funds is that they tend to be more expensive. Well that's not the case due to huge competition in the market.
Retail funds have come down with pricing and they can provide you with great investment choices, so they are really worth your consideration.
2. INDUSTRY SUPER FUNDS
These funds are generally designed for people who work in a particular industry,
but some industry funds will allow anyone to join.
But just because your employer provides you with this option doesn't mean you have to accept it.
You can still choose your own fund.
Industry funds are regarded as less expensive or "cheap".
As I said, industry has changed, has matured, there is a lot of competition within the industry,
therefore there is hardly these days a difference in pricing between many retail funds and industry super funds.
3. PUBLIC SECTOR FUNDS
Those are funds generally only open to government employees.
4. CORPORATE FUNDS
These funds are usually only available to employees working for specific employer,
so if your employer provides you with this option, you can take it or you can request your own.
Now, corporate funds tend to be more expensive, but they do have very good investment options in most cases,
and before you dismiss it please always check your insurance options as they tend to be some of the best.
5. SELF MANAGED SUPER FUNDS (SMSF)
These are funds where you decide to run your own fund as a trustee.
You take on all the responsibility of administration, compliance and investment decisions.
SMSFs they tend to be complex and they are most certainly outside of the scope of our discussion here,
but if you decide to have your own SMSF you can always request your employer
to make all superannuation guarantee contributions, together with any salary sacrifice contribution to your fund.
It is super fund like any other and it is your choice.
If you want to learn more about superannuation guarantee contributions have a look at this video.
The second video explains everything you need to know about salary sacrifice.
At the commencement of your employment your employer will likely provide you with SUPERANNUATION STANDARD CHOICE form.
Alternatively you can download this form from the Australian Taxation Office website,
but I actually listed the link below this video, just to make it a little bit easier for you.
So what steps should you take in order to choose the most suitable fund for yourself? Well....
1. Good selection of investment options
Let's be honest, the selection you make in your investments, asset allocation and fund managers,
will be the biggest determinator of investment performance and return of your fund.
The name Balance option or Growth fund or Conservative fund does not mean the same investment mix asset when comparing superannuation funds.
Each can have a completely different asset allocation with different exposure to different industries,
and ultimately provide different investment outcomes and returns.
I can tell you one little secret. Well, most financial planners will never ever use those default, general funds such as: Conservative, Balance or Growth. WHY?
Well.... on one hand they tend to be some of the most expensive and number two you can't control where your money is being invested and
you very often don't even know where investment is being made.
A Balanced fund from one super fund does not have to equal the balance fund of another super fund.
That goes for all different asset allocation.
As you know a good portfolio is a mix of growth and defensive assets.
For example a range of investments into Australian Shares, International Shares and Property, those three are your growth assets.
Investments into Australian Bonds and Fixed Interest, International Bonds and Fixed Interest and Cash,
those are your defensive assets or income producing assets.
And then you might have some exposure into Alternative Assets as well.
The problem is that still up until now, there is no industry standard to say what the Defensive, Conservative, Balance or Growth fund is.
It is up to your super fund trustee to decide.
So if they differ between super funds greatly, how can you compare them?
It is like comparing an apple with a pear.
And believe me, your funds returns will depend on that choice more than anything else over the long term.
Also a word of caution. Those default mixed funds tend to be some of the more expensive options
and what's more you don't really know how your money is invested.
And isn't that the point of investing to be able to choose where you want your money to be,
which industries you want to support.
For example, if you don't support gambling how do you know that your super fund is not investing into casinos?
If you are against mining, how do you know your super fund is not investing into RIO Tinto or BHP?
If you want to support cleaner energy, social justice, equal opportunity, environmental improvement...
how do you know your super fund is even considering any of those ethical issues?
So look through your PDS and list of all the funds available.
Do you have a choice of specialist funds, and then choose ones that you like the most,
choose the ones that are best in a specific market, or specific industry or specific type of asset.
With a little research you can create your own investment portfolio that will support your cause, your beliefs,
improve a mix of growth and defensive assets which in turn improve your super fund performance.
But make sure that you are always able to make choices and updates to your portfolio at any point in time in the future.
And remember, past performance is no guarantee for future performance of any super fund however,
a good investment mix should provide a good long-term return that will boost your retirement nest-egg.
2. Appropriate insurance
So is your super choice always better than your employer-provided superannuation fund or default fund?
No, not always. And before you dismiss the fund your employer provides,
you better check the insurance options available to you.
If you still have a mortgage or family that depends on your income, your personal insurance might be much more important
that all investment choices or even low fees.
And if you have a serious medical issue, you may find that no insurance is available to you in a retail market, or is above your budget due to high cost.
So if for example, your employer provides you a corporate super fund, this could be the best option for you
when it comes to insurance cover, as it is underwritten on a wholesale basis, so you don't have to go through any underwriting
and hopefully you can get the cover you need, to provide financial security for your family should something happen to you.
Insurance included under superannuation agreement can include: life insurance, total and permanent disability, and income protection insurance.
Let me know in the comments if you would like to have more information on the topic.
If yes, then I can create another video explaining insurance issues.
Also, there are many advantages to have insurance through your super, but there are also disadvantages,
and you really need to be aware so you can make an informed decision.
3. Superannuation fees and charges
Well, right now we are coming to the hottest topic that was so loudly underlined by "Barefoot Investor" author Scott Pape.
And yes I did read the book, and yes I agree, this is terrific book - as a starting point. But only as a start to your financial journey.
Do I really agree that Hostplus is the best super fund?
No, as I said before there is no such thing as "the best" super and I do hope I managed to explain those reasons to you by now.
You really have to find the superannuation fund that suits you and provides all the benefits you require and you need, for yourself and for your family.
So what sort of fees can you expect to pay within the superannuation fund?
Entry and exit fees
Fortunately most super funds stopped charging those
but please check your PDS to confirm.
Administration fees
Those are fees charged by the super fund directly for their work for members
such as: preparation of PDSs, statements, tax returns, customer service.
Switching fees
payable if you want to move full balance or portion of your money from one investment option to another within your super fund.
Trustee fees
Those are fees charged by the trustee of your fund for their work to ensure that your super fund stays compliant
and activity is carried out according with PDS
Investment management fees
This is the fee charge by the underlying fund manager,
so people who actually make investment decisions for you, do daily trading and hopefully provide your fund with good investment return.
Another misleading information about fees when comparing funds is that you can't really compare cost of investing into International Shares
as opposed to investing into Australian Shares. Both are growth assets, but cost to invest into International Shares
as well as necessary research is so much greater which will impact on the level of investment fees playable for such a fund.
Again, it is not comparing apple with apple.
Some super funds may have more types of fees so read PDS of the fund you are considering.
4. Other Services
well what other services does the superannuation fund provides to you.
Some super funds are more progressive than others but please check what you need and what you don't as each additional service might cost you extra.
Can you access your account details online? Is it easy to make additional contributions into your account?
Does the fund offer the option of personal financial advice or retirement planning advice?
Well quickly again a word of caution. Industry funds for years have been bashing financial planners for charging fees for their services.
The truth of the matter is that, if you go to your Industry fund you will only receive a general advice for free.
If you wish to receive a detailed personal financial advice you will be charged a fee just like in a free market
for the work of the financial planner, who is employed by that super fund.
Also just to make sure that you are fully aware: the financial planner that is not aligned with any financial institution
will provide you with impartial and most diligent advice looking at all industry options that are available and best for you.
The financial planner of a super fund, has underlying interest to ensure that you stay with that fund, hence well...
I think that this is for the interest really of the super fund and not necessarily for you as a client.
It is a pretty long video, but I hope you got heaps of valuable information here.
So just to recap those four steps:
No 1. Do your checklist of the features and services that are most important
to you to your family and to your life.
No. 2 Do your research which fund can actually fulfill your needs.
No. 3 Check the prices charged by superannuation fund you consider and
No. 4 Choose the best investment portfolio for your needs and your risk profile.
If you are still unsure or just simply want the best choice, just speak to financial planner.
We are specialists in this area, we have access to lots of extra data about virtually every single superannuation fund in Australia.
If you don't have financial planner, well... reach out. All my contact details are listed in the description below this video.
Since we are talking about superannuation, check those investments all dedicated to different superannuation issues, contributions, salary sacrifice,
things that you should consider when investing and contributing to super.
Well thank you very much for joining me today and I hope I will see you here soon. All the best.