How to choose your first super fund

17 November 2022

Starting your first job means getting your first paycheck and your first super payment. You'll grow your super over your working life - and that could be more than 50 years - so choosing your first super account is an important choice.

Find out what to look for in your first super fund, and how the right fund can make a big difference over the years.

 

Why your first super fund is an important decision

Your super is your money, and you should choose a super fund you trust to grow your savings for the future. If you don't nominate a super fund when you start your first job, your employer will set you up as a member of their default fund. You can check with your employer to find out more and make the decision that’s right for you.

In Australia, there are several types of super funds, but most people are with either an industry fund or a retail fund. When you’re choosing your first super fund, it helps to understand the difference.

 

Different types of super funds - industry and retail funds

There are 2 main types of super funds: industry and retail. Both industry and retail funds are set up for the member’s best financial interests. However, the main difference between them is what happens to any profits the funds make. Industry super funds are ‘profit to member’ organisations, which means that the money made goes back into the fund for the benefit of members, not shareholders. Retail super funds are commonly run by financial institutions, such as banks and wealth management companies, and return some profits back to shareholders for any key day-to-day services outsourced to the parent company.

READ MORE: RETAIL OR INDUSTRY SUPER FUNDS – WHAT IS THE DIFFERENCE?

 

How super works and why it’s important for your future

Super is the money set aside while you’re working and saved for you to live off when you retire. Your employer pays a part of your wages or salary into your super account and your super fund then invests that money for you, helping it grow over your working life.

Compounding and how it grows your super 

When you choose your first super fund, make sure you take a long-term view. Your employer payments will add up over time, and you may choose to add extra money on top1.

As well as your contributions, your super is also earning money from compound returns. This is the money your balance earns from interest paid on the interest you earn. Just like your balance does, extra contributions can also generate compound returns.

Here’s another way of thinking about it: A snowball rolling down a hill may start small but grows bigger the longer it rolls. Think of the snowball as your super balance, and its increasing size your compound returns.

READ MORE: COMPOUNDING AND HOW IT GROWS YOUR SUPER

 

Compare how super funds perform over the long term

Your super builds up over almost 50 years (for some people). So, you need to look for a super fund with strong, long-term performance. This could make a big difference to the amount of money you retire with. Look at past investment results, not just how a fund is performing today.

Understand net benefit - it’s an indicator of a fund’s value

Net benefit is your investment returns, after paying administration and investment fees and costs. When you’re comparing the performance of super funds or checking that your fund is delivering on your investments, the net benefit is an important factor to consider.

Explore net benefit: AustralianSuper’s Balanced option

The following table shows how the net benefit of AustralianSuper’s Balanced option compares to the average of all super funds and the average retail funds. This shows what a member would have for 5, 10 and 15 years to 30 June 2022, in addition to a $50,000 starting balance and employer contributions, assuming they started with a $50,000 annual salary.2

Net Benefit – Super
Over 5 years Over 10 years Over 15 years
AustralianSuper Balanced option $23,636 $91,376 $128,125
All super funds (average) $17,978 $71,778 $99,002
Retail super funds (average) $15,315 $61,846 $72,807

Net benefit refers to investment earnings to 30 June 2022 (less administration and investment fees and costs). Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.

 

Compare super fund performance

To compare funds for free, you can use the ChantWest Super AppleCheck tool via the AustralianSuper website. This independent tool lets you see up to 3 super funds side-by-side.

 

Understand super fees and what they cover

A super fund is responsible for managing and investing your money. Super funds charge administration and investment fees to cover the cost of these services, but not all funds charge the same or in the same way.

Some super funds charge a set fee and some charge a percentage of your account balance.

Just like performance, you can use the ChantWest Super AppleCheck tool to compare funds’ fees side-by-side.

It’s important that you check that you’re not paying more in fees than you are paying into your super. Expensive fees can eat into your super savings and over time negatively affect your balance.

EXPLORE: AUSTRALIANSUPER FEES AND COSTS

 

Keep on top of your super

Check your pay slips to make sure you’re receiving your super contributions, and check your account a few times a year to keep on top of your balance. If you’re an AustralianSuper member you can download the free mobile app to keep track of your super, check your investment performance and review your insurance.

Now you know what’s important about choosing your first super fund, compare how funds perform so you can make the right decision.

 

COMPARE SUPER FUNDS NOW

 

 

Sources:
1. Before adding to your super, consider your financial circumstances, contribution caps that may apply, and tax issues. We recommend you consider seeking financial advice. 2. Comparisons modelled by SuperRatings, commissioned by AustralianSuper. The outcome shows the average difference in ‘net benefit’, a measure of past investment earnings after administration fees, investment fees and costs and taxes have been taken out. The results compare the AustralianSuper Balanced investment option and comparable balanced options, for historical periods to 30 June 2022. Insurance premiums and other fees and costs may also apply. Outcomes vary between individual funds. See Assumptions for more details. Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns. AustralianSuper returns before 1 July 2006 are calculated from equivalent options of the ARF and STA super funds. Please note, the administration fees charged to members will be changing on 1 September 2022 for Pension products and 3 September 2022 for Accumulation products. Please refer to the product disclosure statements for updated information at www.australiansuper.com/pds

This may include general financial advice which doesn’t take into account your personal objectives, financial situation or needs. Before making a decision consider if the information is right for you and read the relevant Product Disclosure Statement, available at australiansuper.com/pds or by calling 1300 300 273. A Target Market Determination (TMD) is a document that outlines the target market a product has been designed for. Find the TMDs at australiansuper.com/TMD.

AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.

 


Ready to join?

Joining online will take you less than 15 minutes.

Join now
Back to top