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How to know if your super fund is a rip off


Let’s be honest, last year’s royal commission into the banking, superannuation and financial services industry did no favours for super funds. Mistrust was (and still remains) rife, as the discrepancies between superannuation options were revealed. But don’t worry, with some well-informed advice you’ll be able to tell if your super fund is working for you, or against you.

1. Check your fees

One of the first things you need to do is to check your fees and charges. Every super fund, by law, will have a disclaimer in the PDS stating that “small differences in both investment performance and fees and costs can have a substantial impact on your long-term returns.” Our advice? Don’t disregard this statement. Even a seemingly tiny percentage difference in fees can add up to large amounts of money over time. Look for an option where your fees amount to no more than 1 percent of your total super value.

Here’s how you add up your fees: most superannuation funds have two types of fees – administration and investment.  Administration fees can vary from as low as $70, up to $400 a year, while investment fees can vary between 0.06 percent and 2.5 percent. If they’re charged annually they should be on your end-of-financial-year statement. Once you figure out how much you’re paying in fees as a dollar amount, convert this into a percentage of how much your super is worth. If it’s about 1 percent then you’re doing pretty well.

2. Pick the high performers

While fees and charges can eat away at your superannuation, the performance of your fund is key to getting good returns. Put bluntly, you could lose up to 13 years of pay by opting for a poor performing fund.

When it comes to analysing your choices, start by looking at the returns of your fund over the last 5 to 10 years.  The average rate of return according to the Productivity Commission is 5.7 percent per annum, while under-performers recorded a return of 3.9 percent. Remember that not all funds calculate their returns after fees and charges, so use the advice in point 1 to calculate the true return before making any decisions. If your return is above 5.7 percent then you’re onto a winner, if it’s below 3.9 percent then it might be time to look for a new fund.

3. Look out for added extras

Most superannuation funds have a default setting of death insurance, but if you already have an existing life insurance or income insurance policy elsewhere, this added extra will just be costing you money.

If you do decide on the insurance policy issued with your super fund, make sure you check out the premiums. Many options start with lower premiums but increase dramatically over time, so be sure to investigate exactly what you’re paying for.

Another common pitfall is employers failing to pay at least 9.5 percent into your super account. If you’ve already agreed on making additional super contributions, make sure your employers are actually paying these added extras, or any super at all, as there have been reports on employers failing to do so.

4. Seek professional help

Choosing the right superannuation fund for you can be time-consuming and confusing, which is why seeking the advice of a financial advisor can be so useful. Not only will it save you time but, most likely, money as well, as we look at many different factors to find the right fund for you.


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Our response to limit the spread of COVID-19

  • As COVID-19 continues to spread, we would like to take a moment to let you know what Financial Spectrum is doing to respond.

    While we haven’t been directly affected with any confirmed cases, we are taking all reasonable precautions to remain safe.Our priorities are:

    1. Keep our staff and clients safe
    2. Stay fully operational in our service delivery and continuing to manage your financial affairs
    3. Play our part in minimising the impact on our community against the spread of COVID-19

    Financial Spectrum has the technology, infrastructure and systems to continue business as usual remotely and our staff will now be working from home.

  • You should notice no change to our service, with the exception that we are encouraging our clients to meet via video call, rather than face to face, unless requested. We will be contacting all clients with meetings booked over the next two weeks with instructions for a video call.This is an evolving situation and we will continue to monitor developments. We will keep you informed of any material changes to our approach.

    These are unprecedented times and we understand that many of you will be feeling unsettled about your finances. We would like to assure you that we are open for business and are here to help you. If you don’t have a meeting booked but would like one, or if you have questions, please contact us at info@financialspectrum.com.au or on
    02 8238 0888

Brenton Tong

Managing Director

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