How switching your super can save tens of thousands of dollars

Switching superannuation funds or investment options can boost your wealth by tens of thousands of extra dollars. Here’s how.

Australians hold a handy $3.3 trillion in superannuation savings that is multiplying while we all sleep.

Our combined super stash has tripled in the past 15 years, and is forecast to double in the next 15 years. We rank fifth globally in terms of total retirement pension assets – punching well above the weight of our population.

But just because Aussies’ nest eggs are growing, it doesn’t mean we should ignore what’s happening with our super, and sometimes a switch is needed.

It may be switching super funds or just switching investment options within an existing fund, and the benefits of doing so can deliver tens of thousands of extra dollars later in life.

SWITCHING FUNDS

If you’re in a poor super fund charging high fees and delivering low returns, you could be losing $50,000 every 15 years, according to modelling from SuperRatings commissioned by the nation’s biggest superannuation fund, AustralianSuper.

Data released last week by regulator APRA shows hundreds of thousands of Australians are still in bad super funds, some that have been closed to new members following two years of failed performance tests.

If you haven’t checked your super for years and are sitting in an old fund, you’re probably paying too much because overall fees have dropped in recent years.

A simple superannuation switch can help multiply your wealth. Picture: iStock

Super’s long-term nature removes it from the radar of many workers, who underestimate the huge power that compound interest has on every dollar of savings growth over decades.

Switching to a new super fund is easy and can be done online, and the new fund you choose will usually help you through the process. There are also online comparison tools available, or you can speak with a financial planner.

Just be sure to understand the fees, insurance and investment choices, remember to tell your employer to pay your compulsory super into the new fund, and check that you do not lose valuable life insurance that you may not be able to get again.

Many people have multiple super funds with small balances charging multiple fees, and these can be easily consolidated on the my.gov.au platform.

SWITCHING INVESTMENTS

Most Australians can choose how their super savings are invested, and a majority stick with their fund’s default option that is typically a balanced mix of Australian and international shares, property, fixed interest, cash, infrastructure and some smaller alternative investments.

This has historically done quite well, but younger savers can potentially boost their future nest egg size by adopting a higher-risk, higher-growth mix – with no cash or fixed interest -in their 20s, 30s and 40s. Similarly, older Aussies nearing retirement can consider dialling down their higher-risk assets as asset preservation becomes more important.

Experiencing by a 50 per cent stockmarket crash months before your retire can crush a nest egg. Fortunately many super funds now offer life cycle investment options that automatically alter your investment mix to reduce risks as you age.

Switching investment mixes can easily be done online or by phoning your fund, but avoid making knee-jerk reactions to a market slump.

During the Global Financial Crisis in 2008 and 2009 many older Australians switched their superannuation investments to cash right at the bottom of the market, then missed out on the massive rebound that quickly followed, and their nest eggs never recovered.

Switching super is simpler than you think, and should be at least examined by all who want to be richer.

Originally published as How switching your super can save tens of thousands of dollars