What you need to know about switching superannuation funds

As you enter your golden years, it’s essential to make sure you have the right superannuation fund to support your retirement lifestyle. With so many options available, switching your superannuation fund can seem daunting, but it’s an important decision that could save you thousands of dollars in retirement.

If you’ve put your current superannuation fund under the microscope, run the comparisons, crunched the numbers, and decided that it’s time to say goodbye there are a few things to think about to make sure your new fund is going to deliver.

When is the right time to switch my superannuation fund?

There’s no one-size-fits-all answer to this question. The right time to switch your superannuation fund will depend on your individual circumstances. However, it’s important to consider your retirement goals and your current superannuation fund’s performance. If your current fund is underperforming and not meeting your retirement goals, it may be time to switch to a new fund.

Additionally, if you’re approaching retirement, you may want to consider switching to a fund that has a more conservative investment strategy to protect your retirement savings.

Sarah Saunders, head of consumer advocacy at Industry Super Australia, agrees that performance is important, but says there are other considerations that should be on your checklist.

“In addition to returns, you might also compare in-depth areas such as investment options, insurance coverage and a range of fees,” she says.

“You could also choose a fund based on your profession or trade.”

A number of industry funds were founded to help employees in specific industries build their retirement savings, and while most funds are open to everyone these days, it’s worth checking if there’s an industry fund aligned with your area of work.

Pros and cons of switching super funds for over 60s

Switching superannuation funds later in life can offer several benefits, but there are also some potential disadvantages to consider.

Pros:

• Improved performance: If your current superannuation fund is underperforming, switching to a new fund that has a better performance track record can help improve your retirement savings. A better-performing fund can help you achieve your retirement goals, particularly if you are approaching retirement age.
• Lower fees: Many superannuation funds charge fees and charges that can impact your retirement savings over time. By switching to a fund with lower fees and charges, you can reduce the impact on your retirement savings, giving you more money in your pocket when you retire.
• Better investment strategy: Switching to a new superannuation fund can provide you with access to a more diversified investment portfolio. This can help to minimie risk and increase returns, particularly if you’re looking for a more conservative investment strategy as you approach retirement age.
• Additional benefits: Some superannuation funds offer additional benefits, such as insurance coverage, which can be beneficial for those looking for added protection in their retirement years. By switching to a fund with additional benefits, you can enjoy added peace of mind knowing that you have additional protection for yourself and your family.

Cons:

• Loss of benefits: Depending on your current fund, you may lose certain benefits by switching to a new fund. For example, you may lose access to a defined benefit plan or insurance coverage. It’s important to carefully review the terms and conditions of your current fund before making the switch to ensure that you’re not losing any benefits.
• Exit fees: Some superannuation funds charge exit fees when you switch to a new fund. These fees can be significant and impact your retirement savings, particularly if you’re switching to a new fund late in your retirement savings journey. However, many funds have waived exit fees, so it’s important to check with your current fund before making the switch.
• Higher fees: While switching to a new superannuation fund can offer lower fees and charges, some funds may have higher fees and charges. It’s important to review the fees and charges associated with any new fund before making the switch to ensure that you’re not paying more than necessary.
• Investment risks: Switching to a new superannuation fund may involve investment risks. If the new fund’s investment strategy is significantly different from your current fund, it may not align with your retirement goals or risk tolerance. This could result in losses that could impact your retirement savings.

Will I lose any benefits by switching my superannuation fund later in life?

Another important thing to check is that you won’t lose out on valuable benefits by changing funds.

Switching your superannuation fund shouldn’t cause you to lose any benefits, as long as you follow the proper procedures. You’ll need to ensure that you’re not in a defined benefit fund, as these funds usually have restrictions on switching.

You’ll also need to make sure that you’re not losing any insurance coverage or incurring any exit fees by switching. It’s important to carefully review the terms and conditions of your current superannuation fund before making the switch.

The Australian Securities and Investments Commission’s (ASIC) helpful MoneySmart consumer site notes that you should get professional advice before leaving an old-style defined benefit fund because the terms typically offered by such funds are very generous and thus possibly not matched by your new fund.

Once you’ve made the decision to switch to a winning fund, however, there’s some good news. Getting the switching process underway takes just a few minutes when done online. It’s as simple as going to your chosen fund’s website and filling in an online form to open an account.

If you prefer to do things on paper, give the fund a call to ask for the product disclosure statement for your chosen fund and complete the enclosed form.

While taking that first step, it’s worthwhile making sure all your retirement savings are consolidated in a single account at the same time. Many industry super funds are already matching members’ multiple super accounts to help them consolidate their savings, but you can do so yourself by creating a myGov account to use the Australian Taxation Office’s online super search tools.

Or you can search with AUSFund, which was created to look after the unclaimed and inactive super accounts from more than 35 other funds from both the industry and retail super sectors.

Speak to an expert

While switching your superannuation fund later in life can be a smart financial decision, it’s recommended that you seek a financial advisor before making any final decisions to help you make an informed decision and avoid any costly mistakes.

A financial advisor can help you assess your retirement goals and determine if switching funds is the right decision for you. They can also provide guidance on choosing the right fund and navigating any fees and charges associated with the switch.

While seeking financial advice may come with a cost, it can ultimately save you money in the long run by helping you make the right decision for your retirement.

This article was originally published on May 31, 2019, and updated on April 17 2023.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.