What to consider
Choosing a default super fund for your staff is an important decision and one which can impact how much money they will have in retirement. So, what should you consider?
Choosing a default fund
All Employers need to select a super fund as their employer-nominated fund, also known as your default fund. This is the super fund where super guarantee (SG) contributions are paid to for employees who don't choose their own fund. Choosing a default fund is an important decision. The choices you make can affect the quality of retirement of your staff.
The super fund you nominate must:
- be a complying fund (one that meets specific requirements and obligations under super legislation)
- be registered by the Australian Prudential Regulation Authority (APRA) to offer a MySuper product.
Modern Awards (made by the Fair Work Commission) specify some of the super fund/s that an employer can choose to nominate. If you check the industrial awards applicable to your employees, there may be funds listed as default funds for your industry.
Check the fees your employees will be charged by the fund. Low fees are generally good, but you should look at what your employees will get for their money, and how the funds’ investments perform relative to the costs.
Investment options in super funds aren’t all the same: risks, returns and fees can vary.
Different people can be different types of investors, so it may be helpful to consider the types of employees you have in the business. For example, if the average age of your employees is under 30 you might look for a fund with some aggressive investment options. If you have a mixed demographic, you may want to choose a super fund which has a variety of investment options to suit different needs. Your employees may find it helpful to have access to various options as their needs change through life.
If your employees have particular values, it may be worth considering who the super funds invest with, what their top stock holdings are and whether they offer an ethical investment option.
See our investment options to understand the variety of investment options legalsuper offers.
When looking at a fund’s investment performance, it is ideal to view long term returns. Super is a long-term investment. While past performance is not an indicator of future performance, picking a fund that has performed well over (at least) the last 5 years might leave your employees better off in the long term than only looking to last year's top performing fund. The fund may have higher fees but strong performance might justify the expense.
MySuper products must offer insurance. Consider the cost and what your employees get for their money. Cheap insurance cover may have significant exclusions. For example, casual or part-time workers may not be adequately covered. Conversely, paying more for insurance can affect super balances. You need to weigh up the pros and cons, and make sure the fund offers insurance which suits your employees.
It’s important to trust the organisation that is managing your employee’s money. Reviewing who a super fund is governed by, and the management structure of a fund can be an insightful way to learn more about the fund. Super funds should be transparent about their governance. If you can’t find the information you’re looking for on a website, an annual report might disclose more detailed information.
How do you and your employees want to work with the fund? Do you prefer face to face contact, or self-service online? Do you need phone support outside of business hours? Would your staff benefit from educational seminars, advice and in-person support? Does the fund have an easy to use website and are they easy to contact?
The type and quality of a funds service will affect your experience and the time you spend managing your accounts. Think about what you and your employees might want, and make sure your fund of choice will offer you the service you need.
What else does the fund offer? Some super funds offer educational seminars and advice. Does the super fund have a good website that helps you find information easily? Are there other benefits, like discounts with affiliated organisations? Do they offer any benefits for parental leave?
Think about what you and your employees’ value and do some digging to see if the super fund you choose aligns.