Should you bother to switch?

A SIGNIFICANT life event including change of job, starting back in the workforce after studying or taking parental leave or a return to Australia can trigger people to change their super fund.

But a large number of people remain apathetic about switching – Roy Morgan research found in 2014 only 3.3 per cent of people bother to change their funds.

When it comes to either sticking with your fund or jumping ship, many factors should come into play, including the long-term performance, fees charged and insurance costs.

Industry Super Australia chief executive David Whiteley urges Aussies to take notice of what the fund they are in, or considering switching to, is doing. He says they should look at its “long-term net return.”

“Super funds are incredibly diversified so they will be investing in all asset classes – if a fund has been outperforming others for a decade, as opposed to a poor performer, that’s a good sign,’’ he says.

“However people shouldn’t place absolute reliance on past performance and they have to be conscious that past performance does not indicate future performance.” One of the nation’s largest funds, AustralianSuper, has more than 2.1 million members and had 275,000 new members join in 2015. The fund’s group executive of membership, Paul Schroder, says fees should be a key consideration when deciding to stay or switch funds. “One per cent better performance will mean $97,000 more to a 25-year-old when they retire,’’ he says.

“And the same with fees. If these cost 1 per cent more, you will have almost $100,000 less at retirement.”

So on a $50,000 balance you should be paying no more than $500 per year in fees.

But Whiteley says low fees don’t always guarantee good returns so you need to do your research on your fund and ask them questions before leaving or signing up to a new fund.

Insurance should also be considered – this includes coverage for total and permanent disability, death cover and income protection.

Schroder says if swapping, be sure to understand what protection you have if something were to go wrong.