Five questions to ask a super fund

Here are five key questions to ask about superannuation so you can make sure you’re in the right super fund.

Super funds vary widely, in terms of everything from the fees they charge to the kinds of investments they make, as well as where they invest. All these factors can have a significant impact on the overall performance of a fund. If you’re letting someone else manage your super and make the decisions about your investments for you, you should ask them the following questions.

Five questions to ask a super fund

1. What are the fees like?

It’s very important to check what fees are involved. There are a wide range of fees that can be applied to super, both one-off and ongoing. These may include establishment fees, ongoing management fees and fees on the contributions you make, as well as fees for changing investments. Some funds may also charge performance fees, which are payable if your fund performs better than industry benchmarks.

2. What are the returns on investment?

Fees make a big difference to the final amount of super you accumulate.

Funds are required to publish an annual report so you can see how they perform, and some comparison websites also aggregate this data. The Australian Prudential Regulation Authority (APRA) also reports annually on the performance of Australia’s largest 200 super funds, as well as issuing its Quarterly MySuper Statistics report.

Superannuation is about long-term growth and performance. You may need to look at long-term growth to get an idea of how a fund is performing compared with the rest of the market.

3. What sort of industries do they invest in?

It’s important to know what kinds of industries your money is invested in, as some may be riskier than others or may offer poorer long-term growth prospects.

Another consideration is ethical investment, also known as sustainable investment or socially responsible investment (SRI). This has grown in popularity in recent times, as people want their money invested in responsible businesses. These businesses may include those involved in clean energy, medical breakthroughs and innovative technology. Ethical investing also avoids investments that harm people, society, animals and the environment.

However, the benefits are not solely about saving the planet. Research by the Responsible Investment Association Australasia (RIAA) shows that ethically focused Australian equities funds and balanced funds have outperformed mainstream funds over one, five and 10 years.

4. How broad is the investment spread?

The remit of an industry or retail super fund is to invest your money for you. You don’t get to choose specific investments, but you can select from a range of options. These relate to how much risk you want to take on.

Four main types of investment options include conservative, which mainly invests in fixed interest and cash; balanced, which invests around 70 per cent in shares or property; growth, which invests around 85 per cent in shares and property (you may be able to select ‘high growth’ and raise this to 100 per cent); and cash, which invests solely in deposits or a ‘capital guaranteed’ life insurance policy.

If you want full control, and also to be able to set your own investment strategy and revise it when required, you may prefer to establish a self-managed super fund (SMSF). Doing so also gives you access to a wider range of investment options, such as residential property.

5. Who owns the fund?

Banks or investment companies usually run retail funds, and the company that owns the fund tends to retain some profit. By contrast, industry funds and public funds are ‘not for profit’ funds, so all profits are put back into the fund for the benefit of all members. If you self-manage your superannuation then you and any other members retain any profits you make.

If you would like more control over what’s happening with your retirement savings and think an SMSF could be for you, please download our information pack. If you’re ready to establish an SMSF, you can apply now with ESUPERFUND.

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