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How to choose a Super Fund.

15th November, 2021

If you joined Defence after 30 June 2016, you can choose the fund your super is paid into, but how do you go about choosing a fund?

Generally, all most people need is a fund with low fees, an investment option that suits your needs, and a history of competitive investment returns. Past returns won’t guarantee future profits but it is a useful way to compare funds.

Investment options

Before you start comparing funds, think about how you will invest your super. Super is a long-term investment you can’t access until you meet a condition of release, usually leaving an employer after turning 60. If you’re more than 5-6 years away from accessing your super you probably have time to ride out the short-term ups and downs of the share market, so you might consider a more aggressive investment option – a bit more risk, but historically better long-term returns.

Why think about investments first? Well, the fund that demonstrates good returns in the ‘Balanced’ category, might not perform as well in the ‘Growth/Aggressive’ or ‘Conservative/Capital Stable’ options. You might want a fund that offers an ethical or socially responsible option, or a range of other investment choices that may interest you.

If you want to eat an apple, you choose from a variety of apples, you don’t waste time comparing oranges.

Comparison tools

If you don’t already have a fund or two in mind, a comparison website can help you identify better performing funds. Some of the non-government super comparison websites include:

Be aware that comparison websites may not cover the whole market and as businesses, may make money through promoted links. They are useful for benchmarking returns for a particular investment option.

If you haven’t chosen a super fund and don’t have a stapled fund account, your employer will pay your super into a default super fund, such as ADF Super, which must be a MySuper product. MySuper accounts typically have lower fees, simple features (so you only pay for services you need), and either a ‘single diversified’ or a ‘lifestyle’ investment option.

The Australian Tax Office (ATO) has a YourSuper comparison tool that allows you to compare MySuper products.

Fees

Super funds charge a range of fees for managing your investments, which could include:

  • Administration fees – set dollar amount and/or a percentage of your balance, deducted regularly from your account
  • Transaction / switching / buy-sell fees – usually a percentage-based fee charged when you make a transaction or switch investment options, deducted from your account when applicable
  • Investment management costs – charged by investment managers for managing the investment, deducted from investment returns before they are credited to your account.

For each fund you are considering, make sure you understand what fees will be charged, how and when.

Comparison table

Here’s an example of how you might compare super funds. Labels for similar investment options will vary, so focus on the mix of growth (shares and property) and defensive (cash and bonds) assets. Growth assets carry more risk but usually generate higher long-term average returns.

Super FundFund AFund BFund C
Investment optionAggressiveHigh GrowthSustainable Growth
Growth / Defensive asset mix92/874/2677/23
Returns as at:30-Sep-2130-Sep-2131-Aug-21
1 year return23.85%14.86%24.70%
3 year average return11.01%8.36%12.00%
5 year average return10.95%8.55%11.70%
10 year average return10.69%10.60%12.10%
Admin fees paNil0.63%$65 + 0.1%
Investment feesDeducted from investment returnsDeducted from investment returnsDeducted from investment returns

As you can see, you may not be able to exactly match the asset mix and return date, and each fund has pros and cons. As super is a long-term investment you might place greater weight on the 5 and 10 year average returns rather than those achieved over a shorter period, consistency over one or two good years.

Underperforming funds named and shamed

MySuper products (employer default funds) are required to meet a specified benchmark, or notify members that their fund underperformed. To check whether your fund is a dud, go to Your Future, Your Super Performance Test.

If you have any questions about your current super fund, contact the fund directly or contact the ADF Consumer Centre.


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