You may be richer than you think. Most people have multiple super accounts as a result of changing jobs and lose track of how much they actually have. Once you consolidate your super, people are often pleasantly surprised.
Research by Rice Warner found that if all super fund members were to consolidate their multiple accounts, the average Australian account balance of $50,300 would jump to $90,000 – an increase of 79%. Policymakers and the super industry tend to concentrate on the average account balance when discussing national retirement savings rather than the average member balance, a more realistic, less bleak figure.
Rice Warner says people who focus on their full super savings may feel more of an incentive to save for retirement and more inclined to consolidate their multiple accounts. The good news is it’s never been easier to do.
All it requires is a few mouse clicks on the myGov website. You can also ask your preferred fund to do the consolidation for you. Apart from saving on fees, it will make managing and monitoring your super more convenient.
“Do a stocktake,” recommends Alex Dunnin, director of research at Rainmaker Information. “Find out how much super you have and who it’s with. Once you bring that information together, straightaway you are in a position to make much smarter decisions.”
You may discover there are sound reasons for keeping two or three funds: an older fund might offer generous life insurance benefits, or you might want some diversification. If you have a defined benefit fund, you would want to keep it.
The point is, don’t get too focused on fees. “Most fees are done as a percentage of your balance plus a flat administration fee. Often that flat fee isn’t much,” says Dunnin. “I might have Colonial First Choice and Hostplus. Both are pretty good funds and they do different things. If I were to keep both, I’m not paying that much extra in fees. I’m always going to be paying fees as a percentage of funds under management anyway. What’s the worst I’m going to be paying? An extra $60-$100 a year? That’s hardly going to kill me.”
Look at returns over three to five years, he says. “If a fund is consistently below average, the chances are it’s not going to go from the bottom of the league tables to the top. But it also works the other way. If a fund is consistently above average, that’s a really good sign – it’s usually doing that for a reason.”
Dunnin says super funds regularly contact members to say they’ve identified your other funds and are happy to roll them over into your current account but don’t go ahead without doing these checks first.
“They’ll do it without charge because the more money they have rolling in, the higher their fee income will be, so they want you to have all your money with them. But you can do it in reverse – you can contact a fund you prefer and say, ‘Get me out of the one I’m in now and put me into yours.’ The key point with consolidation is you are trying to get yourself organised, it’s not that you should be in just one fund. Consolidate by all means but do for the right reasons.”
Easier than ever
You can view and combine your super accounts via the Australian Government’s myGov website at my.gov.au. It also provides useful information.
First check what life insurance you are losing before exiting a fund and make sure you are consolidating into the best fund. It’s not necessarily the one with the biggest balance or the one you have with your current employer.
Make sure your employer can contribute to your chosen fund.
• Log in to myGov, or create an account if you haven’t used it before, and link your account to the Australian Tax Office.
• You’ll be able to see details of all your super accounts, including any you have “lost” or forgotten about.
• If the government, your super fund or your employer can’t find an account to transfer your super to, the ATO will hold it on your behalf.
• You can combine multiple accounts by transferring your super into your preferred account. If it is a fund-to-fund transfer it will generally take about three days.
For more information on keeping track of your super, see ASIC’s moneysmart website.