If you have seen the TV commercials for industry funds, you will be familiar with their catchphrase, which says “low fees can make a difference for life” and they are not wrong, but they are only half right. In fact, most people start by comparing commissions and returns when evaluating the performance of their superfund. So what features should you compare and what do you get what you pay for?
1. Rates
Rates may vary depending on the type of fund you are with. An important piece of information is to consider the fees you pay in relation to the benefits you receive from your fund. A recent independent study (i.) Revealed what the average member is charged in account fees, for the following account balances. If you are paying high fees and are not receiving any services and are not satisfied with your returns, you should research your options.
For members with a balance of $ 50,000, the industry average fee is 1.67% *
For members with a balance of $ 100,000, the industry average fee is 1.62% *
* Rates include average member advisory fee for corporate retirement funds: 0.40%
2. Insurance coverage
If you joined your employer’s superfund, you should receive a group insurance benefit, without the need for a medical exam, at a competitive group rate. In some cases, your employer will pay for some or all of the insurance coverage. If you join a superfund as an individual rather than as an employee of the company fund, you may not be able to access competitive wholesale rates for insurance prior to taking a medical test for coverage and may be decline coverage, if you have any pre-existing medical conditions.
3. Returns
The performance of your fund is ultimately the most important consideration. For people nearing retirement, or for those in individual retail funds or self-managed superfunds, returns need to be looked at more closely than for those in employer superfunds. (Also called corporate and industry funds) Additionally, you can compare the performance of your funds using an independent rating company such as Rainmaker or Chant West. Rainmaker’s “Super Pick” Benchmarks (ii.) Are a great way to compare the performance of your funds to the rest of the industry. These indices calculate the returns of more than 200 superfunds from a mix of industrial, retail and corporate funds, and the index gives you an indication of the average balanced superfund option performance.
There are 3 types of superfunds you can invest in
Corporate funds (used by your employer) – Managed by banks and insurance companies. They provide good benefits, insurance, and personalized rates, and in some cases, these benefits are fully or partially funded by the employer. Corporate funds offer multi-manager investment options with slightly higher fees than their industry fund counterparts. They also offer ancillary benefits like discounted health fund rates and gym memberships.
Industry funds (used by your employer) – Industry funds originate from the union movement. They offer a low-cost service, with slightly more investment options than an average corporate fund. Where they lack is in providing very limited insurance coverage, they also invest in property and unlisted infrastructure assets that often overstate their performance and increase the level of risk compared to their corporate and individual fund counterparts.
Individual Retail Superfunds or SMSFs – Offer the largest investment and insurance option. These funds are typically managed by a financial planner, who can customize these funds to suit the individual. Compared to their corporate and industrial fund counterparts, individual funds won’t give you benefits like lower fees and automatic insurance. However, it is important to note that these benefits combined come at a cost to an individual’s goals, where investments and insurance options are structured for the benefit of all members of the corporate and industry superfunds, but not for the specific needs or goals of an individual. .
CHOICE RISK INSURANCE FEE BENEFITS
-CORPORATE limited average custom moderate yes
-INDUSTRY limited above average very limited low none
-SINGLE unlimited low-high unlimited high yes
So now that you know what the differences are between these main types of superfunds, the next question is, should you stay or should you go?
A simple guide to follow
The benefits that come from a corporate or industry fund, such as low account fees and subsidized insurance, are benefits worth maintaining for most people.
However, if you have an above-average income paying a lot of taxes and your goals are to retire at a certain age or to create aggressive wealth and plan for your children’s education, then work with a financial advisor and invest in retail funds or a self-managed agency. super background might be right for you.
The bottom line is that tips can help you achieve your financial goals, but naturally this comes at a price than staying with a company superfund, where members generally receive group advice where their individual needs and goals are not always considered.
SUPER FUND CHECKLIST:
RATE
Do you or your employer pay your fees and how do they compare to the industry? OTHERWISE
BENEFITS
What additional benefits do you receive? Are your fees and insurance paid, is it enough coverage? OTHERWISE
Gym Membership and Health Fund Discounts – Are They Important to You? BUT
RETURNS How does your default fund compare to its peers? OTHERWISE
SERVICE Do you receive financial advice or assistance with your account? OTHERWISE
ABSTRACT
Choosing a super fund or reviewing your existing fund can be a difficult task to do on your own. After all, how can you determine if you are getting value for money and, more importantly, if the investment option you are in is right for you? Seeking advice is always the best way to ensure that your needs and goals are taken into account. Remember that it is your super for your future, so make the most of it.
APPENDIX:
I. Superfund average rates were obtained from a recent report completed by The Heron ‘association dated July 18, 2009
II. The sample size for this research was 117 funds, including retail master trusts, corporate funds, and industry funds.
III. Rainmaker Research compiles their “Super Benchmark Pick” indexes. Website: http://www.selectingsuper.com.au
IV. The rest of the information provided is of a general nature and should not be construed as personal or financial advice.
© This content is the property of – Freedom Wealth Advisers and Robert Joseph