Insurance premiums for superannuation funds are on the rise because of increased claims, so expect to pay more for insurance as part of your super fund.
According to McPhee, insurance is a very important part of superannuation and adds a lot of value. “Costs are pretty volatile but what we have seen are some of the lower risk funds like Catholic super, Christian super have traditionally had the best value insurance,” McPhee says.
“More manual and industry-based funds typically have more expensive insurance.”
Member services such as advice and education is an area which superannuation funds are working hard on.
“There is a lack of growth in super funds, so funds have to work really hard to keep the members they have got rather than just chasing down new members,” McPhee says.
“There is more and more advertising and funds are looking to improve their communication. Most members can now ring up their fund and get advice whereas even three or four years ago they wouldn’t give you advice.”
When assessing a fund’s member education, Chant West considers what information is available on its website, if it helps members to understand and weigh up different strategies, and if it helps them calculate whether they’re on track to reach their retirement goals.
In terms of communication, Chant West considers whether a fund helps members to engage with super, understand how it works, and how they can make the most out of it.
Heine says what kind of member services are available in a fund is dependent on the market segment.
“Different funds have different offerings, so funds like Netwealth, which are for more sophisticated investors, tend to have fewer tools because they’re not needed,” he says.
“MySuper, the main industry funds at the lower end and balanced funds will have more member services. These funds also offer products similar to ours, but at varying prices depending on the sophistication of the client.”
McPhee says SunSuper has always been strong in the area of member services with “top notch” member education and support.
Chant West’s research into funds with the best member services also placed SunSuper highly, with it, QSuper and REST in the three of the top five funds for communicating with members and member education.
Other funds which ranked well include CareSuper, Russell, AustralianSuper, AMP Flexible Super and Telstra Super.
Administration is never the reason someone chooses a fund, but it is often the reason someone leaves.
“Nobody thinks about it until a mistake is made or the paperwork is missing,” McPhee says.
Traditionally retail funds have had superior administration but there is “enormous variation” in the industry.
McPhee recommends SunSuper because it is self-administered and Q Super.
Governance of super funds is certainly in the spotlight and McPhee says there are likely to be changes in this area because of the new government.
There is continuing debate over whether independent directors should be compulsory on boards and what the definition of independent is.
“We have seen enhanced disclosure around remuneration, so around half the funds disclose what directors get paid and slightly less than that disclose what executives get paid,” McPhee says.
Not all in the super industry are happy with the requirement to have independent directors, but Heine says he agrees with the new rules.
“We operate with a governance structure where we have executives and independent directors on the board. It’s important to have external input to keep everyone accountable for others investments,” he says.
“During the global financial crisis there were many reviews done on the industry and the result was to build a stronger super system. The new regulations coming in are making sure our super system can continue being an important part of everyday working life.”
McPhee recommends HostPlus as a strong not-for-profit fund and says CBus “has come a long way” and is now “a leader in governance”.
If you can’t find the perfect fund another option is to create your own through a Self-Managed Super Fund.
You need to have sufficient capital and the time to invest in managing your fund and adhering with compliance requirements.
“SMSFs are a viable option for the right people at the right time, but for many people you can access many of the features in standard funds,” McPhee says.
Heine says SMSFs are most suited to people in the mid-stage of accumulation, but increasingly, managed funds are allowing people to have more control over their super.
“Some funds now provide a huge amount of flexibility around investments and planning, so I recommend looking at retail options with a range of investments before an SMSF.”
Overall, before choosing a super fund, Mohankumar says it’s important to conduct due diligence, investigating if the fund is right for you.
“Some funds are more risky, others are more conservative. Look into each asset class and don’t just go into a fund or an investment for the sake of it. You also want to make sure your fund is well diversified.”
Cara Waters is a former SmartCompany editor. Previously, Cara was a senior reporter for the Financial Times’ website and worked for The Sunday Times in London.
