Every year we make it a point to write at least one blog article on consolidating super. Consolidating super is where benefits held in two or more super funds are ‘rolled over’ into a single fund – either one of the existing funds or a new fund altogether. Over time, consolidating super can have a substantial impact on your retirement benefits.
The main benefit of consolidating super is to reduce fees. Almost all managed superannuation funds charge two types of fee. The first is often called an administration fee. This fee is often charged on a weekly or monthly basis and is often fixed. This means that the level of the fee does not change depending on the amount held in that particular super fund.
The second kind of fee is often called an investment or service fee. This fee is typically variable. This means that the amount of fee that you pay increases as the amount of benefits within the super fund increase. Generally, the fee is calculated as a percentage of the amount held within the fund. Where a fund offers more than one investment option, the investment fee can vary across these options.
Consolidation offers two ways in which fees can be reduced. If you have more than one fund, you are probably paying more than one administration fee. When benefits are consolidated into a single fund, only one administration fee needs to be paid. If this fee is fixed, then the fact that the balance within the fund has increased due to the consolidation will not affect the administration fee. You stop paying the second or subsequent administration fees.
The other way consolidation can reduce fees is where the fund into which you consolidate your benefits has a lower investment fee. Lower fees can be one of the elements of a fund that you consider when choosing which fund to use for the consolidation. (That said, lower fees should not be the only element of the fund that is considered. Sometimes, you do only get what you pay for).
It can be surprisingly easy to find yourself with two or more super funds. The most common way for multiple funds to be created is where people change jobs. For simplicity, many people simply join the super fund suggested to them by their employer. Once you’ve had two or more jobs, this means that there is a good chance that you have joined two or more super funds.
Australia provides a central register through which you can search for what many people describe as ‘lost’ superannuation benefits. These are benefits held within a super fund that people have forgotten they have. One of the first things we do when we meet a new client is to conduct a search for lost super benefits. We then look at the options available to our client, to decide whether consolidation would make sense in their case.
If you or someone you know think that you may benefit from consolidating your super, please do not hesitate to get in touch. We would be more than happy to search for any lost super and to compare your existing funds to various options available to make sure that your super is working hard for you.