Choice Magazine Superannuation

[Angelique Syria]

Atlast count, about 70% of Australian employees let their employer choose their super fund for them, probably because the same percentage of Australians don't quite know what that decision, or non-decision, might mean.

(On a side note, lack of useful information is the main reason Australians fail to engage with the superannuation system, as a 2016 CHOICE research project confirmed. Could super funds and the super industry as a whole do a better job of communicating with account holders? Yes.)

For the record, you nearly always have the right to choose your own super fund. (The only exceptions are industrial agreements and defined benefit funds. If you're in one of the latter it's probably good to stay put as these types of funds can have many advantages, not least a guaranteed amount of money once you become eligible for payouts.)

What you don't want to do is end up with little bits of money spread across multiple accounts, all of which will charge a variety of fees as well as, in many cases, premiums for risk packages that generally include life insurance, total and permanent disability (TPD), and income protection insurance, areas where premiums are on the rise.

There's a long-running feud between the retail and industry super fund sectors, with both claiming to deliver higher returns. Often this is a matter of self-serving analysis, but at any rate such claims shouldn't be a decisive factor in choosing one or the other. There are some important differences between the two, though.

Industry funds are also open to most people, though some are restricted to certain industries. They generally have lower fees and are nonprofit, meaning any profits are returned to the fund to benefit its members.

If you started a new job after 1 January 2014 and didn't choose your fund, your employer would have been required to direct your contributions into the MySuper option offered by their choice of fund.

Among other things, MySuper accounts are meant to have lower fees and simpler fee structures, be easier to compare from fund to fund, and offer greater transparency of both fees and account performance along with what's actually in the account.

Super funds that screen out things like fossil fuels and weapons-makers are increasingly giving non-ethical funds a run for their money. If you're ethically minded, an ethical super fund can be a sound choice.

That said, low fees alone won't mean you'll have the biggest nest egg in the end. Some low fee super fund accounts are passively managed, meaning the fund takes a set-and-forget approach and hopes your account does as well as the overall market in the long run.

The majority of Australian superannuation account holders have their money invested in what's known as "balanced option" accounts. The idea is to balance risk with returns and have a mix of shares, property and other investments such as fixed-interest and cash.

Over-exposure to the share market during the global financial crisis of 2008, for instance, had a devastating effect on near-retirees who didn't have enough years left in their working lives to make up the losses.

Cash - About as safe as you can get and still stay in the financial system as we know it. Your investments and the amount they will earn will be locked in, but the returns will likely be far less than what shares and property can deliver.

That said, there is evidence to suggest that some of Australia's super fund managers aren't the sort of financial savants you would hope would be managing your money. Or perhaps some just aren't trying very hard.

Super fund performance varies over time across the industry, so there is no single best way to find the fund that will make the most of your contributions. But there are some guidelines you should follow.

When visiting such sites for research purposes, the first thing to do is read their explanations of how they rate funds. Some concentrate on fees, for instance, while others look mostly at performance.

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Australian Super is the largest superfund in Australia, used by more than three million Australian workers. With an annual administration fee of $382, it is quite cost-efficient compared with other super funds.

Additionally, it has long been a top performer in the industry. Over the last 10 years, it has provided members with an average annual return of 8.42% on its My Super product, and also offers basic insurance and financial advisory services in its membership.

Australian Ethical Super is, as its name suggests, the leading ethical investing superannuation fund in Australia. It has won countless awards for its responsible and ethical investment endevours, making it a prime contender for Australians looking for such an option.

While Australian Ethical Super has a lower average performance across the past decade compared to other industry leading superannuation funds, it has been highly ranked on consumer option site ProductReview by its members. It also includes income protection insurance, TPD and death cover in its annual administration fee, which many of its competitors do not.

Hesta has been highly reviewed by its customers via ProductReview as a good superannuation fund, giving the company a ranking of 4.2 stars out of 5. It has a relatively high returns average across the past decade, and lower administration fees than many other superannuation funds in the industry.

Included in the administration fee is standard cover for death and income protection insurance, although there is no TPD cover, and customers can also use an online chatbot at any time of day or week for general enquiries.

Aware Super is one of the leading choices for Australians looking for an ethical investing option due to its many accolades, including a 202 A+ rating from UN-backed Principles of Responsible Investment (PRI).

It has two MySuper offerings, with one being open to all Australians (the Lifecycle Investment Strategy option), and the other being exclusive to Queensland government employees and their families (QSuper Lifetime). Unfortunately, as Australian Retirement Trust is a new entity, customer service has been highlighted as a difficult process for prior Sunsuper and QSuper members following the merger.

Telstra Super has won many industry recognised awards as a leader for superannuation, and has impressive ESG credentials for Australians looking to invest more ethically, as well as strong customer reviews.

Superannuation is vital for all Australian employees, as it is the key to setting up your life for retirement. To do so, you need to have a good superannuation fund: one that not only offers you high returns, but also supports you throughout your retirement planning.

We used a rigorous methodology to compare superfunds in Australia for consumers, so that you could take the guesswork out of it. Our methodology included comparing 19 of the most populated MySuper products from superannuation funds across the nation.

Alongside this data set, Forbes Advisor conducted additional research via company websites and communications to establish the best-of ranking. Of the 19 different MySuper products compared, nine were then shortlisted as the best performing across the dataset.

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