When I tell people that I’m a financial adviser, one of the first questions they tend to ask is; ‘what super fund should I be in?’. My non-answer to this question is usually; there are many other far more important things to worry about.
The single biggest factor that determines the return your super fund will get is the underlying assets you are invested in. For example, if I have $300,000 invested in a Sunsuper account, and $300,000 in a QSuper account, and they are both invested in the ‘Cash’ option, the returns I get are probably going to be very similar. This is because the underlying asset I’m invested in will be similar.
If I have $300,000 in my Sunsuper account invested in the ‘Cash’ option, and $300,000 in my QSuper account invested in the ‘International Shares’ option, the returns I get are going to be drastically different each year. In a year that international shares perform strongly, my QSuper account is going to have fantastic return relative to my Sunsuper account… however the opposite will happen in a year when international shares perform poorly.
This is less obvious when comparing ‘balanced’ or ‘default’ options. Most of these options are fairly similar, but there is usually a small difference in the percentage held in growth vs defensive assets. For example, Super Fund A might have 25% of their Balanced option invested in Australian Shares, compared to 35% in the Balanced option of Super Fund B. If the Australian share market has a great year, it’s obvious that Super Fund B is going to be much better off.
There are definitely reasons to select one super fund over another. For example; the fees on the account, the insurances attached, the investment options available, or if your employer will provide additional benefits when paying into a certain fund. This is definitely a decision to make, and to look at in conjunction with an overall plan. But the reality is that it is extremely unlikely that moving from one fund to another will have a significant impact on your retirement savings over the next 10 years.
So what kinds of things should you be focused on? To repeat myself; the single biggest factor that determines the return your super fund will get is the underlying assets you are invested in. This decision will be different depending on your years to retirement, as well as a whole host of other factors. Getting this right is half the battle.
Written by Dallas Davison.
Dallas Davison, Michael Hogue and Ali Hogue.