Choosing a superannuation fund is a big decision. Making the right choice can have a significant impact on your financial future. Super will likely be the biggest investment you have in your lifetime after a house. So, it makes perfect financial sense to spend the time to get it right!
So where to start? An important first step is to decide what benefits, features and options are important to you in a superannuation fund. Is it minimal time requirements from you or is it flexibility and control over your investments?
Firstly, when considering a ready-made superannuation fund product such as either an industry or retail fund it is important to compare “apples with apples” and review a few key items across the same investment option, such as:
Past performance of the fund
Whilst this may seem to be obvious, it can be sometimes difficult to determine the true performance of a superannuation fund.
The long-term performance is a better indication of a superannuation fund’s success rather than what it is doing right now. We would suggest you look at the rate of return for at least the last five years to see how a fund has performed. However, importantly remember historical performance isn’t everything.
Fees and charges
Like many investments, fees charged by superannuation funds can be hard to determine. How much you pay in fees will impact the amount you end up with at retirement. Fees can be either a percentage or a fixed rate, or a mix of both.
Always consult the product disclosure statement (PDS) which will show a full list of applicable fees and charges associated with a fund.
Insurance
Always review the types of insurances on offer via a fund and importantly how much these premiums will cost. Larger funds can typically provide lower premiums as they cover many individuals.
However, sometimes these insurance products cannot be as transparent around their rules in the event of a payout. Importantly always read the PDS to ensure the cover is enough for your circumstances.
What about self-managed superannuation funds?
Generally medical professionals, with larger superannuation balances prefer to take more control over what their retirement savings are invested in, a self-managed superannuation fund (SMSF) helps to achieve this.
SMSFs represent a significant portion of retirement savings in Australia. One of the key drivers for the establishment of this style of fund is individuals wanting more control and flexibility over the investments providing for their financial future.
A SMSF can be a flexible, cost effective and tax effective option. A SMSF gives an individual optimum control over their superannuation. Trustees of SMSFs can essentially invest in any investment that they believe will provide them with the best retirement result (subject to various constraints imposed by superannuation laws).
SMSFs are the most flexible superannuation retirement savings vehicle available.
The trustee of the fund will have the ultimate flexibility in executing various strategies, which are allowed by superannuation law but often not by commercial funds, as they are unable to provide a ‘one-size-fits-all’ product.
These can include holding business real property, such as your medical practice or surgery building in a SMSF. For larger superannuation balances, a SMSF is generally more cost effective than a commercial fund. The reason being that administration fees are fixed up-front and do not increase proportionally with the balance of the fund.
No matter what type of superannuation fund you decide best fits you, it is important to consider all features as well as ensuring your retirement savings vehicle will meet your needs not only today but into the future.
If you need help in this area please do not hesitate to get into contact with our team.
