Provided by Mercer: 2/6/08
Michelle, 38, has six superannuation investments with six different super funds – one for each job she’s had in her 17 years in the workforce. Each year, she receives six annual reports, an equal number of benefit statements and numerous other pieces of paper – newsletters, notices and bulletins – the majority of which are regularly filed in the recycling bin.
Sound familiar?
It should: it’s estimated that the average Australian has two super accounts, accumulated over their working life1. While many people have one or two accounts, others have quite a few more. Today’s mobile workforce means that many Australians find themselves with more than one super fund as they move between jobs over their working life.
Super may also become ‘lost’ when people move house or change addresses without advising their fund (or funds). Currently, one in two working Australians have unclaimed super. This lost super is cumulatively worth $12 billion and is recorded on the ATO ‘lost super’ register2.
Of course, it’s easy to forget about the various super investments you might have. Super can sometimes be invisible. It’s likely you don’t see the money each month as your employer makes contributions for you. And once it’s in your super, you can’t really touch it until you retire, or just before. So, it probably doesn’t feel like money that is yours right now.
Combining your super into one fund may feel like a chore, but it’s worth considering in order to ensure you’re making the most of your super for your retirement.
What does having different funds mean?
Having multiple funds has implications for your super as it accumulates and becomes your retirement benefit. At a purely practical level, there may be administration hassles as you grapple with multiple sets of similar documentation for each fund. But, more importantly, there are implications for your benefit at retirement.
Having your super investment sitting in a number of different funds means that you’re paying fees on each of your investments. How does this work? Well, firstly, each super fund may charge you a fixed cost such as a member fee. Secondly, many super funds charge fees on a scale that’s based on your account balance. The fees usually reduce as your account balance increases. If not managed carefully, these factors may have a negative effect on your final benefit at retirement as more money is directed into paying fees instead of into investment returns which may otherwise compound over time.
It also means that your retirement strategy is in many hands – potentially reducing the level of control you have. Having a coherent and effective investment strategy for all of your retirement money means you can plan your retirement with care. But this becomes harder if your super is subject to multiple investment strategies.
And in some cases, there may not be an investment strategy available that suits your needs. If you leave money in a super fund when you leave or change employers, your previous fund will often transfer your money to an Eligible Rollover Fund (ERF). It’s unlikely you’ll have a choice of options that allow you to tailor the investment to your needs.
Consider consolidating
Consolidating your super means choosing one fund to invest your super and rolling the money from your other super funds into that account. While there are obvious benefits to consolidating your super, there are also some issues to consider.
If you are considering consolidating your super, talk to your current funds to find out:
- if they charge any exit fees – you may find that the exit fees they charge when you roll over are too high to justify the move,
- if your benefit will be adversely affected in making the rollover – there may be some instances where rolling your money out of a particular fund may mean missing out on a higher benefit at retirement, and
- whether you will lose or gain particular benefits, such as insurance or investment options by choosing a particular fund.
If this seems bewildering, remember that you don’t need to do this alone. A financial adviser is a good resource to draw on when making this type of decision. They can help you navigate the range of options available and assist you in making an effective decision about your retirement future.
More information
If you would like to speak with a Mercer financial adviser about your account consolidation options for your super, please call us on 1800 633 403.
1 ASFA website/media release: superannuation.asn.au
2 Interview with Catriona Lowe, Melbourne Conference Unit, Consumer Law Action Centre,
Tuesday, 20 May 2008, 10.30 am (minscl.treasurer.gov.au)
This information has been prepared by Mercer (Australia) Pty Ltd ABN 32 005 315 917 for general information only. The information does not take into account your personal objectives, financial situation or needs. Therefore, you should not act on this information if you have not considered the appropriateness of this information to your personal objectives, financial situation and needs. You should consult a licensed or appropriately authorised financial adviser before making any investment decision.
