‘Consolidate’ means to make something stronger, more solid or effective. So it makes perfect sense to consolidate your super. If you only have one account in super that’s great, but are you sure? According to the Australian Prudential Regulation Authority (APRA) there are on average about three super fund accounts per working Australian.
We’re not just talking cents here either. The Australian Taxation Office (ATO) reported there’s $17.5 billion lost super waiting for someone to come and claim their share. Some of it could be yours.
Why consolidating your super makes sense
The key benefits of bringing your super fund accounts together are:
1. Saving you money by paying only one set of fees
2. Reducing the paperwork you receive and might need to complete (time is money!)
Fees
For each account you have in super expect to receive regular reports (twice a year or quarterly) and be charged an administration or member fee, and typically an investment fee.
Fees are usually charged on the basis of a fee per member, per period ($1 per week or $89 per annum for example) and, or as a percentage (sometimes on a sliding scale) of the balance in your account (1% of assets per annum for example).
So if you had three different super funds you may be paying three different member or administration fees. Consolidation to one fund could save you two sets of fees.
Fees, administration or investment, calculated as a percentage of the balance in your account may vary, sometimes significantly from fund to fund. All other things being equal, moving to a less expensive fund could save you real dollars in the long run.
More money is deducted from your super fund account if you have personal insurances such as life, total and permanent disability (TPD) or income protection cover through super – but you might actually need these so we’ll address this in more detail later.
Paperwork
A super fund is required to send you send reports on how your retirement savings are going. It will include information about any contributions and applicable tax, how it’s invested, your personal insurance (if you have any in super) and what happens to your super if you die.
If you need to update any details, such as a change of address or who should receive your super when you die, it’s clearly a lot less work if you only have to do it once and not 3 times (if you have 3 accounts).
Other considerations
- Pay for what you need: You may want a fund with better services and features. Alternatively your needs may be simple and suited to a no-frills fund with cheaper fees.
- Fees versus earnings: You might also be worried about your super fund’s performance and how earnings are being eaten away by fees and charges. If changing investment options within the fund doesn’t get you a better return it might be time to find a fund that does.
Why you wouldn’t consolidate super fund accounts
Loss of personal insurance cover
Some funds might allow you to transfer your current level of cover but most don’t, so check before moving your super. If you can’t transfer your cover and leave the fund, you might be without protection and any personal disaster that subsequently follows could mean financial catastrophe for you and, or your family.
Obtaining new cover within super may be difficult if you have a pre-existing medical condition or are aged 60 or over so it’s wise to have a health check with a medical professional before saying good bye to existing cover.
Changes have been made to the types of insurance available in super. For example, ‘own-occupation’ TPD insurance is no longer available to new members of a super fund. If you have existing ‘own-occupation’ TPD cover in super that you need, you may wish to hold onto that super fund account.
Defined benefits funds
If you’re in a defined benefit fund you need to get professional advice before moving to another fund. Once you get out, you can’t get back in and often defined benefit funds are the better option.
No choice
Your employer may be one of a small group that don’t offer choice. If that’s the case, you’ll have to leave it there to accept employer contributions.
Consolidating your super
Consolidating super fund accounts takes a bit of effort in the short term but once done, you’ll find it easier to keep track of and manage. Need help? Feel free to contact us at (08) 8231 4709 or send us an email at info@centrawealth.com.au.
Article reproduced from MapMyPlan
