Here’s what to consider before switching super funds, according to experts

There’s a lot to consider when switching super funds. Image: Getty
  • There are many factors to consider if you’re thinking of changing to a different superannuation fund.
  • We reached out to tax and fund management experts to find out what you should look out for when planning to make the switch.
  • The suggestions range from fees involved to insurance to whether you can choose your investments.
  • Visit Business Insider Australia’s homepage for more stories.

Thinking of switching to a different super fund?

There are a range of factors you should take into consideration if you want to make the jump. We spoke to experts in the tax and fund management sectors to find out what you need to look out for before switching.

Looking at past returns

Geoff Warren, Fund Convenor of Australian National University’s Student Managed Fund, told Business Insider Australia that superannuation can be complicated for someone who isn’t plugged into the industry.

While looking at past returns is considered one of the key factors to watch out for when switching super funds, Warren said you should be wary.

“The returns you can actually see in the past come about for a whole variety of reasons and if you start reacting to the past returns there’s just as much chance you’ll do yourself harm as good,” he said.

For example, past returns could be depend on factors like whether the fund was well or poorly managed.

What fees are involved?

Another factor to consider are any associated fees.

Professor Helen Hodgson, a tax expert from Curtin Law School, told Business Insider Australia via email, “The biggest erosion of superannuation account balances comes from fees and charges.

“The PDS (product disclosure statement) for the fund should set out what the current fees are, but check for indirect fees on investment balances as well as account administration fees.”

Hodgson also advised watching out for any transaction costs you might face when switching funds.

When looking at super funds, Warren believes you shouldn’t just go with the one that has the lowest fees. That’s because funds with higher fees may have them due to included benefits, like better access to advice or having portfolios with alternative assets.

“Alternative assets are often a very good thing to have exposure to,” Warren said. “So you get a better portfolio in terms of either higher returns or maybe just lower volatility in the long run.”

He added that if you see a fund with higher fees, find out why: does it hold a lot more property and you want that in your portfolio? Does it have good services that you value relative to other funds? Is it easier to get advice?

Do you have an affinity with the super fund?

There might be a super fund that aligns with your beliefs or causes you stand for, which could be a something to consider when making the switch.

For example, choosing Christian Super if you identify with the Christian faith or choosing Local Government Super based on its focus on socially responsible investing.

“LG Super in New South Wales was very early into SRI or socially responsible investing, which they argued is because their members were very focused on that, and they invested in that way,” Warren said.

Can you choose your own investments?

You should also have a look at whether you can choose your own investments, Hodgson suggested.

“You may be happy with a default strategy, or you may want to nominate the type of strategy, for example a conservative strategy or sustainable investment options,” she said. “These choices will usually be limited or not available in a MySuper superannuation product.”

What about insurance?

Lastly, Hodgson advised taking some time to review any default insurance included in the fund. You should consider whether the insurance meets your needs, if it is adequate and if it is affordable.

“You may be able to opt out or purchase more appropriate insurance elsewhere,” she said.