How to switch Superannuation Funds

Switching superannuation funds is easier to do than a decade ago, when it felt like you almost had to give up your right hand to make a move.

Technology improvements and new rules have simplified the process and minimised the headaches, and switching is free unless you are stuck in an old-school retail fund that slams you with exit fees. The recent introduction of the standard ATO rollover form has made switching easier, especially as the form is widely accepted by superannuation institutions.

However, there are still some traps to avoid when you switch superannuation funds.

The Right Reason

The first step is to understand just why you might want to switch your super.

Valid reasons can include:

  • Leaving a high fee fund
  • Consolidating your accounts to reduce management costs
  • Getting a better spread of investment options
  • Getting a better insurance deal

It is important to note that you should avoid switching based on just one year’s investment performance, because last year’s top funds can be this year’s bottom. Also remember to check the risks involved to obtain returns and the transparency of the underlying investments before chasing yesterday’s return. Try examining five-year investment returns – it’s a much better way to compare funds.

Investment Returns

Switching funds isn’t the only way to generate better returns. Instead, you may be able to improve your returns by staying in the same fund and simply switching investment options.

High-growth and all-share options have done very well in the past few years, but they were severely affected during the GFC when conservative options did much better. Make sure you understand the comparison of returns may be related to investments.

Check Insurance

Superannuation is a great way to hold life insurance such as death and disability cover because the premiums can be paid from your employer’s contributions rather than your own wallet.

But before switching, remember to check that you are not signing away valuable life insurance in your old fund that may be more expensive or unattainable in your new fund. Other benefits you may possibly loose, such as Centrelink payments or health care cards, should be considered prior to switching.

Be sure to seek professional advice if you’re thinking about switching from a defined benefit superannuation fund, because these typically have much more advantages than modern superannuation fund options.

If you wish to speak with a financial advisor or superannuation expert about your superannuation options, give us a call today on 02 9299 7044.

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