How to evaluate your super fund

The Australian superannuation industry is valued at $3.5trillion and that’s only set to grow, courtesy of the superannuation guarantee (SG) and Australia’s ongoing population growth. It could be your biggest asset, and how it is managed will impact the type of lifestyle you will have after retirement. 

Little things make a big difference in the world of super – fees, performance, how much you contribute, the type of fund you choose – and the earlier you think about it, the better it will be for you long term.

As Trenna Probert, founder of Super Fierce, explains, “Often very simple things you can do with your super today can have a massive impact. It could be just $50,000 more in your account at retirement. That’s an extra $80 to spend every week of your retirement.”

But where do you start when looking at your super?

I spoke to a range of experts for a two-part series to explore how to choose a super fund and where your money in investing. In part 1, the experts at SuperRatings and Super Fierce shared how they evaluate superannuation funds and the red flags when selecting your super fund.

The starting point: key things to consider when choosing your superannuation fund

Many investors would still be in their default super fund from their employer. Some may still even have multiple super funds because they ended up with a new one every time they changed jobs. 

So, how do you know if a super fund is right for you. And, if not, how do you go about choosing a new one?

Joshua Lowen, insights manager for SuperRatings, uses six key criteria in his rating methodology, plus a qualitative factor.

1. Investments (performance and processes) – 25%
2. Fees and charges – 15%
3. Insurance – 10%
4. Member servicing – 15%
5. Administration – 10%
6. Governance – 10%

The remaining 15% is the qualitative overlay.

“That qualitative overlay is a mixture of the fund's strategic initiatives, their capability to deliver and our general conviction on the funds, which we develop through direct meetings with the funds,” says Lowen.

While the methodology stays consistent, he and his team will also consider additional focus areas based on what is happening globally.

“Cyber security was a big concern this year, along with ESG and green washing given member and regulator interest. The use of artificial intelligence has also been a theme in terms of how funds are harnessing it to support members or how they are considering risks from artificial intelligence,” he said.

It’s not always easy to do it yourself. As Probert notes, a balanced option in one provider might look completely different to that of another.

“It’s not enough to look at fees. It’s not enough to look at performance. You need to look at those in combination, but importantly, you need to be comparing them on a like for like basis. Compare every option against each other and over time, through different investment periods,” she says.

While it may be tempting to pick this year’s highest performer, Probert points out this can be risky.

“Performance can be transient, whereas fees are really important. Fees can eat into your balance and returns, which makes a huge difference in how your balance grows through compounding over time,” says Probert.

That’s not just performance fees either. Insurance within your superannuation can also chew into your balance, so it’s worth being aware of what the fees are and whether you actually need it.

Insurance in your superannuation is not compulsory – for some, it might be worth having and paying for, others may have better options outside of super.

Both Probert and Lowen view customer servicing as an important thing to think about when it comes to your selection of super.

• Is it easy to talk to them on the phone?
• Can you view your balance quickly on an app?
• How responsive are they to any issues you’ve had or even how quickly did they set up your account?

There’s also customer servicing in terms of additional benefits available to you, like retirement calculators or even the option to access financial advice. Some superannuation funds now offer free or discounted financial advice sessions, which can be valuable to help you plan out your future – including which option in the provider is best suited to you or assisting with strategies to help you build your balance.

Bear in mind if you are finding it difficult to assess superannuation funds yourself, speaking to an expert can be helpful.

The red flags in superannuation

While there’s a lot to consider when it comes to evaluating super funds, there are three key red flags that Lowen and Probert believe rule a fund out of contention for your money.

1. Consistent underperformance
2. High fees
3. Inability to contact the fund (either online or via phone)

Beyond that, it becomes more personalised. There is no single super fund that will be the perfect match for all Australians. It’s also worth noting the extent to which your own views and values shape how you want your money invested – for example, if you don’t want any coal investments in your superannuation, that will write several funds out of the mix to analyse.

Final tips from the experts on superannuation

Remember that superannuation is a long-term investment and consistency can be the key.

“Take the time to pick your strategy and then stick with it. There’s a lot of noise and movement out there but if you can trust in your strategy, it will benefit you in the long-term," says Lowen

Probert also suggests you reframe how you think about your superannuation - and don't forget that even little steps make a big difference down the track.

“People don’t think about their super because it doesn’t feel like it’s their money. We’re present-biased. So, I make sure people understand that super isn't a granny's money box for bingo, bowls and a blue-rinse; it's an investment growing for your future so that you can live life on your terms.”

So whether you are just starting out, or getting close to retirement, don't forget about your super - and seek help from the experts if you need it. After all, this will make a considerable difference to the lifestyle you might have in retirement one day.