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Everything You Need to Know About Enrolling in a Super Fund

If you’ve just gotten a new job, you might see a little box on your paperwork you can check off if you want to join a superannuation fund, or “super fund.” And since a quality super fund can help ensure a good quality of life upon retirement, it’s a good idea to be careful when selecting yours. 

Here’s what you need to know.

1. Understand The Types Of Super Plans

The concept of the super fund is relatively simple. Over the course of your career, you and your employer periodically pay into the fund. The fund is carefully managed and sometimes strategically invested, allowing you to build wealth. Upon retirement, that wealth is paid out in installments to ensure that you have enough money to live well.

There are two main types of super funds: the defined benefit fund and the accumulation fund. As the name suggests, the defined benefit fund is a bit more predictable than the accumulation fund. Defined benefit plans are based on a formula to guarantee a certain amount of income when you retire.

Accumulation funds are a little less stable, but they do have the potential to result in larger disbursements. These funds are invested with the hope of a decent return on investment. When this strategy is successful, the fund can grow substantially, resulting in potentially bigger payouts once you retire.

If you aren’t too familiar with super funds, it may be a good idea to consult with a knowledgeable financial advisor. An advisor who knows your situation will be well equipped to help you choose the best super fund for your future.

2. Learn How Contributions and Taxes Work

Currently, businesses are required to contribute at least 10.5% of your base pay to your super fund. However, plans are in place to increase the amount to 12% by 2025. You also have the option to contribute to your own fund. If you have the means to do so, this is a great way to save for retirement.

There’s no set way that taxes on super funds work; the exact tax structure depends on contributions made, the type of super fund set up, and other factors. But since taxes can make a big difference in how much of your fund is available for retirement, it’s best to look into how each fund you’re considering will be taxed.

3. Pay Attention To Fee Structure

Super funds have a lot of advantages, but a possible disadvantage is the fund management fee. You might think the fee doesn’t look like much. But when you repeatedly pay that fee over decades, you can ultimately lose hundreds of thousands of dollars in potential retirement income. So before you select your super fund, make sure you carefully assess fees and choose a low-fee fund.

If you already have a super fund, it’s a good idea to take a closer look at its fee structure. If you find that you’re paying much more in fees than you would be with another plan, you can switch to one of the best super funds in Australia to make sure you get the most out of your employer’s contributions and your own contributions.

4. Know How To Consolidate Your Super Fund

If you have more than one job over the course of your working life, you may end up with multiple super funds. This can be confusing, but it can also be expensive: with multiple super accounts, you may be stuck with multiple sets of fees.

Luckily, you can solve this issue relatively easily. If you want to consolidate all of your super funds into one account, contact either the company overseeing your super fund or the Australian Taxation Office. 

Either one can help you find past super funds and combine all of them into one account. Of course, make sure to take your time in selecting your main account in order to save money and make your retirement fund work for you!

Bottom Line

Hopefully, you now have a better understanding of super funds, how they work, and how to choose the right one for you. And before you simply sign up for the default plan offered by your employer, make sure you do your research!