Building Financial Acumen: Steps to Selecting the Superfund That Suits You.

A question I’m often asked is how to select the right super fund – superannuation is a bit like a
tailored suit, not a ‘one size fits all’ ensemble.
To determine the most appropriate superannuation fund for your needs, consider the following

  • Your ‘time horizon’ to retirement
  • Work arrangements and intentions
  • Current fund balance(s)
  • Current level of engagement or interest in investing
  • Any restrictions placed on superannuation contributions by your employer.

Some employees are required to have their contributions made to specific funds. If you are in this situation, your options may be limited to adjusting the investment mix within the options offered by your fund.

When starting out in employment with a smaller balance and a lower income (and thus smaller
superannuation guarantee contributions), an industry fund may be most appropriate. Industry funds are designed to have lower fees for those with small to medium balances. The default investment mix will be based on your age and managed internally by the fund.

As your balance grows and reaches between $80,000 and $100,000, it is worth reviewing your
superannuation fund. Depending on your desired level of engagement and interest in the
investment mix, a personal retail fund with a wider investment choice and the ability to invest in a ‘non-tax paid’ manner may become attractive.

Investments in industry funds are ‘pooled’, meaning members share the impact of capital gains tax and transaction costs with others in the same investment option. This differs from ‘non-tax paid’ funds, where each member’s tax position and investment selection can be managed personally to suit their own investment choices, asset allocation, and mix of holdings.

From mid-career and when holding balances of $90,000 or more, a personal retail plan may provide the best overall cost and investment choice offerings to suit your circumstances, preferences, and overall position.

If you prefer making your own investment selections, a personal retail plan may suit you better than an industry fund. While many industry funds now offer a ‘self-select’ product option with a broader investment mix including direct shares, managed funds, and term deposits, be mindful of the administration and investment fees associated with all superannuation products. Some funds may offer low administration fees but higher investment costs, and vice versa. This ATO resource, the Your Super comparison tool, may be useful.

Small business owners looking to purchase business real property or investors with niche interests such as holding artwork, vintage cars, or other unique assets may find a self-managed super fund (SMSF) appropriate. SMSFs can also offer lending in certain circumstances and have their own reporting and auditing requirements.

Experienced investors may find SMSFs attractive; however, with retail funds now offering fee aggregation across family accounts and the ability to hold a wide range of assets, the cost-to-benefit ratio of SMSFs has declined in recent years.

There is no harm in reaching out to a financial adviser for an obligation-free discovery meeting at any point to discuss the superannuation products and strategies that best suit you. The most
appropriate fund for your circumstances is likely to change over the course of your career and lifetime. Superannuation is never a ‘set and forget’ asset, the ‘best fund’ for your circumstances will change over time as your personal circumstances do.

Feel free to reach out for a ‘custom-fit conversation’ to determine the best way to ‘tailor’ your
superannuation to suit you!

About Shayne Sommer

Private Wealth Adviser at Shadforth Financial

Included in Financial Standards’ Power50 for 2023, and awarded Financial Adviser of the Year by Women in finance awards in 2022.

Certified Financial Planner

Contributes to the FAAA’s Certified Financial Planner education program, and Graduate Diploma in Financial Planning subjects with Kaplan Professional

Hold a second dan black belt in karate, and currently a student of Korean martial art, Hapkido.

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