Most of us have changed jobs at some point and perhaps couldn’t be bothered locating the details of your previous fund when filling out the new employee stack of paperwork – resulting in multiple super funds. It isn’t always clear cut what is the best course of action to take and what you need to weigh up before making a change. As this is something we see weekly, I thought I would share my thoughts on the problem with having multiple super funds.
What’s the cost of having multiple funds?
By having multiple funds you are likely have a duplication of administration fees and also insurance premiums. Admin fees apply to most accounts and are generally flat fees, so you will be doubling up if that is the case. In contrast most of your investment fees are charged as a percentage of what you have in that fund, so it isn’t an additional cost. Having multiple funds for the right reasons can be a good strategy, so before you make any changes to consolidate your funds make sure there isn’t a benefit to maintaining such as defined benefits, low cost or exclusion free insurance cover which would more than outweigh the few hundred dollars in multiple administration fees.
Another hidden cost of having multiple funds is missing out on the discounts that having a larger balance with a single fund can deliver you. Many providers have tiered fee arrangements and fee caps which you may miss out on if you spread your super across multiple funds. For peace of mind it is always best to jump online and have a read through the fund’s PDS in the fee section to see how the charges apply to your particular account and balance.
If you have more than one fund – how do you choose the right one for you?
Start with some reflection on what you are looking for in a fund by clarifying what is and isn’t important to you. It is an individual choice and you may want access to ethical investments, choice of insurance providers or any number of other personal preferences and given your retirement savings are likely to be the second biggest asset you have outside of your family home, you shouldn’t compromise.
Armed with that information it makes sense to head to one of the many online comparison sites such as Canstar and ChantWest to compare the funds that meet your required criteria by using the filters. Once you have a shortlist of a few funds that tick the boxes, a more detailed read their PDS and related material is required to make sure you have all of the detail. If you are unsure then get in touch with a trusted financial adviser who can provide personal and unbiased advice.
Cheapest is rarely best, so always dig a little deeper to understand the features and performance. What is most important is getting value for money and ensuring you get what you are paying for. If you don’t care about certain features then don’t pay for a solution with all the bells and whistles, just because it is better featured doesn’t necessarily mean it is a better fit for you.
As always if you need to discuss your personal circumstances or want to clarify any of the above points then feel free to reach out to me at email@example.com.
Pete Pennicott | Principal Adviser | Pekada
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