Articles and information on superannuation usually fall into one of two types – what you need to know when you are saving it, and what you need to know when you are spending it. Much of the coverage of superannuation funds can be similarly narrow. Comparing year-on-year or month-on-month returns gets a lot of attention. But there are so many more aspects to super than just annual returns. Today we focus on five different ways you can evaluate your fund to ensure that you are getting value for money.
Here’s our five-point checklist to guide you through your evaluation:
Is your super fund meeting your needs?
There are five key points of delivery which you can easily check to determine if this is the case:
- Specific assistance and information
- Net benefit to member statements
- Age specific guidance and prompts
- Age Pension support
We’ll look at each of these points in further detail below, but first let’s consider what your fund is actually required to do by law under the Retirement Income Covenant. This requirement came into law on 1 July 2022. It followed the report of the Retirement Income Review (RIR) in 2020, which found that the ‘spending’ phase of super was not well supported at all by most super funds. Yet funds were probably best placed to offer guidance to members as to how and when to move from the saving phase into a drawdown phase after they reaching Age Preservation age.
You will recall that a July 2023 report (released jointly by ASIC and APRA) found that there had been both a ‘lack of progress’ and insufficient urgency’ by the funds. Yet this is a legal requirement so it is important that you check that the services that your fund has on offer in this regard comply.
You will receive (at least) an annual report of contributions to your super fund for the past financial year as well as earnings and net balance as at 30 June. Good funds send thorough reports, often covering how your earnings have increased, depending upon your setting, be it conservative, balanced or aggressive. Many funds also show predictions of your eventual retirement nest egg when you reach Age Pension age. Some will show alternative predictions if you alter your settings. It is reasonable for retirees to expect to receive all of this information so that you can review your risk tolerance and the results of your settings to date and how they may change in the future.
2. Specific assistance and information
There are times when you will need a simple question answered. Good funds have sufficient resources to respond to such queries. It’s easy to forget that a super fund is a service for which you pay, via your fees. So as the customer, your fund has a vested interest in retaining you as a member. So it shouldn’t be difficult to navigate their website, obtain straightforward information and answers to your questions in a timely manner.
3. Net benefit to member statements
It shouldn’t be rocket science to work out how much extra super you have from one financial year to the next. The best practice funds provide this information, set out in an easy to view manner. Information should include:
- Opening balance
- Net cash flow
- Net investment returns
- Admin fees
- Total tax paid
- Insurance fees
- Closing balance.
(Cash flow should also identify your contributions). If your annual benefit statement doesn’t cover at least this amount of information, then you are within your rights to ask your fund to send a more detailed statement.
4. Age specific guidance and prompts
The Australian Retirement Income System is specifically managed according to your age and life stage. This information is already in the hands of your super fund, so the better funds are very good at alerting their members to trigger points when they will need to make new financial decisions or are able to access different options. For instance, Age Preservation age offers many different options for those who can at last access their super. As do Age Pension age, when a majority of retirees have a very real chance of being eligible for fortnightly income.
5. Age Pension support
A recent survey conducted by Retirement Essentials revealed that 76% of member respondents believed that a fund should provide support with the Age Pension and managing super in retirement. This complements the aim of the Retirement Income Covenant. That’s because there are so many options when you can access your super and understanding how super and the Age Pension work together is critical. But complicated! Retirement Essentials believes that the provision of such information and guidance should be par for the course for all funds.
How does your super fund rate? Are you happy with the information and support you are receiving? If not, is it time to consider moving to a more active fund? It may be smart to arm yourself with the knowledge you will need first.
There are two consultations which may help those wishing to review their fund’s performance: