Which Super Fund Should You Choose?

Welcome back to my SUPER SERIES; a series of blog posts in which I fill you in on everything super related that I’ve learnt over the past week. If you missed my previous post “What is Super and Why Should You Care?” let me explain why I’m writing these posts dedicated to the boring topic that is superannuation.

I believe that Aussie twenty-somethings don’t know as much about super as they really should and, honestly, I am no exception. My blog is specifically related to finances for young people, yet even I don’t know enough about super. Why? Because it’s boring as hell. I’m not going to try and deny that. In order to get more super information out there for young people though, I’ve decided to take one for the team and trawl through the boring websites so that I can relay the info back to you in (hopefully) a bit more of an entertaining way.

This week I spent some time researching what’s involved when deciding which super fund you should invest your money into. I spent a whole heap of time on super comparison websites like Canstar and RateCity, but managed to tear myself away from them for a hot minute to go out for ice-cream with my boyfriend (yes I know it’s the middle of winter but that ain’t ever going to stop me from getting Gelato Messina, sue me). As I stood at the glass window tossing up between Raspberry and the special Fat Clemenza flavour, I realised that trying to choose an ice-cream flavour is exactly like trying to choose a super fund. Hear me out…

Imagine that you’re standing in a gelato store staring through the glass at the endless array of mouth-watering flavours. Here’s just a very select few of your options:

STRAWBERRY

CHOCOLATE

CHOC MINT

VANILLA

SALTED CARAMEL

BUBBLEGUM

CHOC CHIP

BANANA

It’s fair to say that all of these flavours are pretty bloody good in their own way. Unless, of course, you’re one of those weird people that doesn’t like banana ice-cream and if that’s the case then I’m not sure we could be mates buuut that’s a whole other issue which I don’t have time to get into right now.

How Are These Ice-Cream Flavours Anything Like Super Funds?

Look, at the end of the day, if you’re going out for ice-cream, you’re a winner no matter what flavour you choose because you’re still going to enjoy that damn delicious creaminess in a cone. The flavours might vary, but the dessert itself remains the same. Choosing a super fund is the same as choosing an ice-cream flavour because, no matter what fund you choose, the basic underlying principles of super remain the same. For example, all super funds charge fees, they all have similar risk options and they all invest your money in similar places. The slight differences between the funds, however, might be the reason that you choose to invest with one fund over another.

ALSO, there are literally endless ice-cream flavour possibilities. Similarly, there are so many super fund options that it can actually be as overwhelming as trying to decide on a flavour at Gelato Messina. I obviously can’t compare every single one of the available Aussie super funds for you, but I have had a look at 8 example funds to show you some of the things that you need to think about when choosing a fund (FYI I chose these example funds randomly and don’t recommend these specific ones over any others).

Default Investment Option: Balanced
Risk:
Medium – High
Admin Fees:
$78 a year ($1.50 per week)
Investment Fees:
0.58%
Estimated Total Fees on 50k:
$533 p.a.
5-year Return:
5.39%
Minimum Suggested Time Frame:
5 years +

Default Investment Option:
Core Pool
Risk:
Medium
Admin Fees:
$65 a year ($1.25 per week)
Investment Fees:
0.69%
Estimated Total Fees on 50k:
$515
5-year Return:
5.44%
Minimum Suggested Time Frame:
5 – 7 years

Default Investment Option:
Balanced
Risk:
Medium – High
Admin Fees:
$117 a year ($2.25 per week)
Investment Fees:
0.6%
Estimated Total Fees on 50k:
$437
5-year Return:
6.44%
Minimum Suggested Time Frame:
10 years +

Default Investment Option:
Growth
Risk:
Medium
Admin Fees:
$104 a year ($2 per week)
Investment Fees:
0.65%
Estimated Total Fees on 50k:
$524
5-year Return:
6.23%
Minimum Suggested Time Frame:
7 years +

Default Investment Option:
MySuper
Risk:
Medium – High
Admin Fees:
$1.30 per week + 0.5% p.a. of account balance up to $100k
Investment Fees:
0.46%
Estimated Total Fees on 50k:
$604
5-year Return:
6.15%
Minimum Suggested Time Frame:
7 years +

Default Investment Option:
Balanced
Risk:
Medium – High
Admin Fees:
$97 a year ($1.87 per week) + 0.29% p.a. of account balance up to $50k
Investment Fees:
0.64%
Estimated Total Fees on 50k:
$617
5-year Return:
5.42%
Minimum Suggested Time Frame:
5 years +

Default Investment Option:
MySuper Balanced
Risk:
Medium – High
Admin Fees:
$57.20 a year (1.10 per week) + 0.3% p.a. of your account balance (capped at $600)
Investment Fees:
0.848%
Estimated Total Fees on 50k:
$631
5-year Return:
6.06%
Minimum Suggested Time Frame:
10 years +

Default Investment Option:
Conservative Balanced
Risk:
Medium – High
Admin Fees:
$96 a year ($1.85 a week) OR 2% of your account balance. No more than $8 per month
Investment Fees:
0.42%
Estimated Total Fees on 50k:
$361
5-year Return:
6.24%
Minimum Suggested Time Frame:
5 years +

What Do All Of These Terms Even Mean?

Before you get too excited about choosing your flavour, let’s take a step back and look at what all of the terms I mentioned above actually mean. Unfortunately, choosing a super fund isn’t as easy as choosing between chocolate and strawberry ice-cream, so you’re going to have to at least try to understand some of the boring terminology.

Default Investment Option: All super funds have different investment options depending on how much risk you want to take with your money. The higher the risk, the better your chance of a higher return. If you don’t select a specific investment style, your money will automatically be put into the default investment option which usually has a medium level of risk.

This CBUS Graph shows how different investment options have different levels of risk. The higher the risk, the higher the chance of a greater return.
This graph shows how the different CBUS investment options performed over 20 years.

Admin Fees: This is literally just a fee you pay in exchange for the super fund looking after your money. The lower the fee, the better duh.

Investment Fees: This is the fee that you have to pay for investment managers and brokers etc to actually manage your money. It’s usually charged as a percentage of your total super balance. Again, you want this fee to be as low as possible.

Estimated Total Fees on 50k: WAIT, there’s more bloody fees? Yep, you read that correctly. Super funds are always charging fees and so it’s important to get an estimate of how much you’re going to be paying in fees each year (this data is fees charged on a 50k balance). These estimated fees include admin, investment, performance and member fees, as well as any fee tiering.

5-Year Return: This is the percentage that your money would have grown over the past five years if it had been invested into that particular super fund. You want to choose a fund that offers you a high return rate so that your money grows faster. Remember that the returns have dropped significantly recently due to this thing called covid (you might have heard of it idk), so check out performance return rates pre-covid too.

Minimum Suggested Time Frame: This is the minimum amount of time that the fund recommends you invest your money before you see any decent returns. The riskier options are more volatile and so often require a longer investment time in order to see those higher returns.

Which Flavour Should You Choose?

This is a good bloody question, and one that I really wish I had a solid answer for you on. However, there are WAY too many super funds out there for me to tell you exactly which fund you should be investing your money into. I suggest that you not only choose a fund with low fees and a high return rate, but you also choose a fund that aligns with your values. That’s why, next week, I’m going to be discussing what each of these aforementioned super funds actually invests your money into.

For now, just remember that it’s always better to go out for ice-cream than it is to stay at home, no matter what flavour you choose. Similarly, it’s always better to invest your money into super than it is to not invest, no matter what fund you choose.

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The Stingy Bitch

Based in Sydney, Australia.
Created in 2020.

Disclaimer:
This site and all of it’s contents are provided for entertainment purposes only and do not constitute personal financial advice. All products that are mentioned are general product advice only, not personal product advice. Not all options are presented and my opinions are subject to change. All content and posts have been prepared as a general summary only and is not intended to be financial advice with respect to any particular matter. This post should not be relied on with respect to any particular matter. If you have questions about any aspect of the content or this site or otherwise require personal financial advice, you ought to seek financial advice. The author disclaims liability to any person who relies on this post.

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Published by thestingybitch

A Twenty-Somethings Guide to Saving Money Whilst Still Living Your Best Life

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