The pros and cons of consolidating your super funds

Category: Australia & News

According to LinkedIn, the average Australian will have 13 different jobs during the course of their working life. 

Given this, it’s likely that you could have a series of different super funds from employer schemes or arrangements you’ve set up yourself. 

An important part of your financial plan is keeping tabs on how much you have in your fund, or funds, to ensure you’re on track to meet your retirement needs and expectations. 

The more funds you have, the more difficult it can be to obtain fund values and keep track of all your super holdings.

So, it’s very possible that you may have considered consolidating all your super funds into a single arrangement, simply to streamline this process. 

There are some good reasons to consolidate all your super funds

Consolidating your funds, especially as you get closer to the time you’re looking to retire, could be a prudent option that can help with your long-term financial planning. 

The I include: 

  • You could save money by only paying one administration fee rather than several. 
  • You have less funds to keep track of, which makes knowing exactly what you have an easier process.
  • A new super fund could provide a wider fund choice and better investment performance than your current funds.
  • You have one point of contact for all your super fund administration, rather than having to deal with a series of different administrators. 

Consolidation isn’t always the best thing to do

However, before you jump straight in and start making plans to consolidate your funds, you should bear in mind that doing so might not be the best thing for you to do. There are several reasons why.

  • You may lose valuable insurance cover

The super fund you’re currently contributing to could be providing you with insurance cover that may not be available through another fund. Such insurance could include life cover, total and permanent disability (TPD), and income protection insurance.

If you start paying into a different super, you may not be able to access the same cover. This could be a potentially serious issue, especially if you have a pre-existing medical condition.

  • Your employer may reduce their contributions

Changing funds may well affect how much your employer contributes. Some employers contribute more to certain funds than others, so you may end up accruing less in your fund.

  • You should take a long-term view of investment performance

You may well be tempted to open a new super – and consolidate your other funds there – because of recent poor investment performance in your current fund. 

Before doing this, you should be aware that the optimum time to assess investment performance is usually four or five years, rather than over a single year. 

At the same time, if you’re attracted by the performance of an alternative fund, be careful that you aren’t simply chasing last year’s investment growth. There’s no guarantee that it will perform as well in coming years, so you may end up in a worse position.

Don’t rush to judgement

Because of the important role your super arrangements play in securing your financial future, you should take your time before deciding whether to consolidate. 

We would also strongly recommend you seek expert advice in this regard. 

Issues you’ve read above, such as insurance cover and investment performance, mean you could end up costing yourself a lot of money by making the decision to consolidate without working through all the financial implications. 

Likewise, if you do decide to consolidate, you should also carefully consider which super to hold your funds in. The best account for you may not necessarily be the one currently holding the majority of your existing super fund. 

Again, we would recommend you seek advice in this regard to ensure you don’t make any mistakes that could be irrevocable and costly.

Tracing all your old super funds

Even if you aren’t planning to consolidate, you should always have a record of what super funds you currently have so you can easily keep track of them. 

If you believe you have gaps in your records or know that there are some funds you’ve lost track of, you can log into the Australian Tax Office (ATO) website, click on “Manage my super” and you should be able to trace all your fund administrator details there.

You will then be able to contact the relevant administrators and obtain up-to-date information.

At the same time, you can ensure that the details they hold for you are in order.

Get in touch

The decision of whether of not to consolidate your super funds isn’t a straightforward one and we would always strongly recommend you seek expert advice before deciding.

If you’d like to talk through your options, please get in touch with us. 

Please note

The information in this article is general in nature. It does not take into account your specific circumstances and should not be acted on without full understanding of your current financial situation, future goals and objectives by a fully qualified financial adviser. In doing so, you risk making commitment to a product and / or strategy that may not be suitable to your needs

The value of your investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.