The right superannuation fund could make you up to $245,000 richer in retirement

- October 14, 2022 4 MIN READ
Superannuation funds performance via Stockspot

Stockspot’s 10th annual Fat Cat Funds Report has found that the right superannuation fund could make you up to $245,000 richer in retirement.

OnePath, Colonial First State, AMP, and ClearView were the worst-performing superannuation funds in Australia, according to a new study from investment platform Stockspot.

While Qantas Super, UniSuper, HESTA, AustralianSuper, and IOOF topped the list as the best-performing superannuation funds.

The 10th annual Stockspot Fat Cat Funds Report, also uncovered that choosing a superannuation fund with low fees will leave you $245,000 better off in retirement.

500 of Australia’s largest super funds

The report analysed more than 500 of Australia’s largest super funds looking at performance and risk over a five-year period.

Despite the importance of superannuation, the information provided by superannuation funds is often murky, complex, and tough to obtain, according to Stockspot.

It’s the only report in Australia that analyses such a wide breadth of superannuation options. It’s also the largest and most comprehensive study of superannuation funds in Australia.

These poorly performing superannuation funds are still gobbling up fees and delivering poor returns for their members. Fees are like termites eating away at our returns, leaving you not very much in retirement.

All super fund members should check to see how much in fees they are being charged by their super fund. If it’s more than 1.5 per cent, then you are probably being ripped off, according to Stockspot.

Key findings

  • The worst-performing funds were OnePath, Colonial First State, AMP, and ClearView
  • The best-performing funds were Qantas Super, UniSuper, HESTA, AustralianSuper, and IOOF
  • Bigger funds don’t always do better than smaller funds, with the benefits of scale not always passed on from the larger funds to their members
  • Funds with larger exposures to unlisted assets did better than funds with larger exposure to listed assets this year
  • Over the long-term, funds with higher fees tend to do worse than funds with lower fees
  • Australians, on average, could save $250,000 by moving from a super fund charging 1.5 per cent a year in investment fees to a fund charging 0.5 per cent per year in investment fees.

Maximise your super

No doubt about it, if you want to supercharge your super, being with the right fund is top of the list. Here are six things you can do to make sure you retire well.

1. Choose the right fund

Probably your most important decision to supercharge your super is putting it into the right superannuation funds. It’s tempting to just tick the box and go with whatever fund your work is signed up to, but as Stockspot’s report has found, this might not be the best option.

To see what fund options are available to you, head to CanstarRateCity or YourSuper. Then do your research to determine which one best suit your super mandate.

2. Watch the fees

Most super funds charge annual fees (check the comparison websites above to see who charges what). This money is paid directly out of your super account and the amount you pay can really make a difference to your balance come access time.

Make sure you take fees into account when you’re comparing super funds. It’s not just about the five or ten year return (and certainly not about the one year return). You should also make sure you’re only paying one set of fees. It makes zero sense to have more than one super account, so consolidate into one.

3. Find your lost super

This is probably the easiest way to supercharge your super of them all. Many Australians have super tucked away in accounts they’ve forgotten exist. In fact, there’s estimated to be almost $14 billion in lost super out there, in over 2.2 million super accounts. If you’ve changed jobs over the years, some of that money could be yours.

You can find out if you have lost super here. You can then roll your lost super into your chosen super account, increasing the balance.

4. Tap into government benefits

The Australian government encourage different superannuation contribution strategies. These incentives vary from tax incentives (see above) to dollar matching. Three that might be suitable for you are:

First home buyers – the first home super savers scheme allows you to save money for your first home inside your super fund. This allows first home buyers to salary sacrifice volunteer contributions up to $30,000 into their super that are taxed at the lower super rate. The money is then released by your super fund when you are ready to buy your first home. There are some caveats attached to this scheme, so do check with your financial adviser to make sure it’s right for you.

Concessional contributions – you can contribute up to $25,000 pre-tax dollars (this includes money contributed by your employer and is soon to be increased to $27,000). “That can be a really good way to get some good tax deductions and get money into your super in a way that you don’t feel as much out of pocket,” says Nash.

Super co-contribution – if you’re a low to middle income earner and make personal (after tax) contributions to your super fund, the government will make a contribution up to $500. The amount the government will kick in depends on how much you contribute and how much you earn. You can find out more here.

5. Make direct contributions

As well as making pre-tax contributions from your salary, you can also make after tax contributions from your bank account. You can then claim this money as a deduction at tax time.

6. Up your risk

Don’t rely on the ‘default’ investment option for your super scheme. Unless you tell them otherwise, most super funds will sit you in a balanced, or even conservative, investment mix that aims to reduce risk. While these options offer lower risk, the also offer lower returns over the long term.

If you’re 10 years or more off retiring, it makes sense to go for a high growth strategy. You’ve got time to ride out short term market fluctuations and take advantage of the higher returns a more risky strategy brings. You can always choose a more conservative approach as you near retirement.

Remember that you can also split your super across different investment strategies. You might opt for putting a certain percentage of your money onto a high growth track and the rest into a balanced strategy. Talk to your financial adviser and super fund to see what works best for you.

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