While selecting a default super fund for employees is compulsory when you’re starting out a business, selecting one may require a bit of homework. And if you have been in business for a while, it would be plausible to spend some time reviewing your default super funds and figuring out which one will work best for you and your employees.
If you’re an employer, you must nominate a default superannuation fund in making Super Guarantee or SG payments for your employees who have not yet selected their own fund.
Selecting a default superannuation fund is a significant obligation for employers. The fund’s performance may considerably influence your employees’ superannuation and their impact on your retirement.
The Chief Executive of The Australian Institute of Superannuation Trustees, Eva Scheerlinckst stated in the middle of the Banking Royal Commission meetings that some employers have been changing and reviewing their default superannuation arrangements.
She said they know that the majority of employers are looking to do the right thing for their employees. Thus, this is the perfect time for any employer or employee to consider or review their default super fund.
If you are one such employer or employee, then this article is for you. Here, we will briefly discuss the things you need to consider when selecting a default superannuation fund.
As an employer, you’re obligated to pay a compulsory super guarantee (SG) contributions for your employees to a fund of your choice if your employee does not (or is not able to) choose a different super fund.
A default, or employer-nominated fund should:
- Comply with the obligations and requirements of the Australian Taxation Office or ATO. The ATO summarized how the funds should comply with the exact responsibilities and conditions under the superannuation law.
- Be registered at the Australian Prudential Regulation Authority or APRA to provide a MySuper product.
Six considerations when comparing default super fund options
- The ASIC’s MoneySmart website mentioned that when choosing a superannuation fund, you must begin by reviewing the industrial awards applied to the employees. Certain funds emphasize more on the workers under individual awards and categorized as default funds for the industry.
- Paul Clitheroe, a financial commentator, suggested that you look into the fees on every fund along with its list of charges.
Clitheroe said that higher fees could get a significant portion of the employees’ continuing retirement savings. MoneySmart counsels that lower fees are not the only conditions, and employers must look into what the employees acquire for their money.
Ensure that your employees are aware of the investment options provided by the default fund. Once you’ve chosen a default superannuation fund, it is up to your employees to think about how their superannuation should be invested.
If they do not make such choice, their superannuation will be submitted into the MySuper fund’s default superannuation product. Many of the MySuper products automatically change as you grow older, and your super account balance grows.
- Think about the fund’s performance in the last 5-10 years. David Koch, a financial commentator, explained that the extended investment returns are essential at evaluating a super fund’s performance since super is a long-term investment and not a short-term deal.
- Examining the fund’s insurance offers. MySuper products should provide insurance in an ‘opt-out’ basis. The financial experts at MoneySmart warn us that the value of the money is crucial since cheap insurance can have significant exclusions like part-time or casual work which aren’t sufficiently covered. On the other hand, paying more on insurance may affect your employee’s superannuation balances.
- Think about any available extras like workplace talks, financial advice, and educational seminars, which can help employees explore their financial options heading towards retirement.
- Think of extras that may be accessible towards fund members like workplace talks, financial advice, and educational seminars that may enable employees to explore their financial venture towards retirement.
A warning for employers
A super fund that provides benefits for an employer, just like a free holiday, discounts on financial products, and tickets for sporting events, may not be doing it legally.
Superannuation regulations forbid such incentives provided to employers under the condition that they join the employee super fund.
For instance, your superannuation fund can’t provide you with tickets to discounted rate over loans or sporting event under the condition that you sign up new employees towards the fund.
If you think that superannuation funds have provided you with an illegal inducement, you can make a report to the Australian Prudential Regulation Authority or APRA.
A case of lost super
While default super funds are a convenient way of ensuring that you get to make compulsory super contributions, there are cases wherein you may have multiple jobs and superannuation. Some of these super accounts may become inactive or unclaimed super.
Under such circumstances, it would be plausible to find lost super online
The Bottom Line
Whether you’re starting a business or trying to review your employer-nominated default fund arrangements, it is crucial to recognize how to select the best one for you and your employees, especially in terms of choosing a super fund which will further your interest and that of your employees.
It’s worth a super fund that will serve you and your employee for the long term. That means more satisfaction for you and less hassle in the future.