13 September 2024
Starting your first job means getting your first pay and your first super payment. You'll grow your super over your working life - and that could be more than 40 years - so choosing your first super account is an important choice.
Find out what to look for in your first super fund, and how the right fund can make a big difference over the years.
Why your first super fund is an important decision
Your super is your money, and you should choose a super fund you trust to grow your savings for the future. If you don't nominate a super fund when you start your first job and you don’t have an existing ‘stapled’ super fund, your employer will set you up as a member of their default superfund. You can check with your employer to find out more and make the decision that’s right for you.
In Australia, there are several types of super funds, but most people are with either an industry fund or a retail fund. When you’re choosing your first super fund, it helps to understand the difference.
Different types of super funds - industry and retail funds
There are 2 main types of super funds: industry and retail. Both industry and retail funds are set up for the member’s best financial interests. However, the main difference between them is what happens to any profits the funds make. Industry super funds are ‘profit for member’ organisations, which means that the money made goes back into the fund for the benefit of members, not shareholders. Retail super funds are commonly run by financial institutions, such as banks and wealth management companies, and return some profits back to shareholders for any key day-to-day services outsourced to the parent company.
How super works and why it’s important for your future
Super is the money set aside while you’re working and saved for you to live off when you retire. If eligible, your employer pays a part of your wages or salary into your super account and your super fund then invests that money for you, helping it grow over your working life.
Compounding and how it grows your super
When you choose your first super fund, make sure you take a long-term view. Your employer payments will add up over time, and you may choose to add extra money on top1.
As well as your contributions, your super is also earning money from compound returns. This refers to the growth generated on your balance, where any earnings are reinvested to potentially generate further returns. Just like your balance does, extra contributions can also generate compound returns, helping your super to grow over the long term. It’s important to remember that investment returns can fluctuate – some years they’re higher and other years they’re lower, and can even be negative.
Here’s another way of thinking about it: A snowball rolling down a hill may start small but grows bigger the longer it rolls. Think of the snowball as your super balance, and its increasing size your compound returns over your working life.
READ MORE: COMPOUNDING AND HOW IT GROWS YOUR SUPER
Compare how super funds perform over the long term
Your super builds up over your working life. So, you need to look for a super fund with strong, long-term performance2. This could make a big difference to the amount of money you retire with.
Understand net benefit - it’s an indicator of a fund’s value
Net benefit is your investment returns, after paying administration and investment fees and costs and transaction costs and taxes. When you’re comparing the performance of super funds or checking that your fund is delivering on your investments, the net benefit is an important factor to consider.
Explore net benefit: AustralianSuper’s Balanced option
The following table shows how the net benefit of AustralianSuper’s Balanced option compares to the average of all super funds and the average retail funds. This shows what a member would have for 5, 10 and 15 years to 30 June 2024, in addition to a $50,000 starting balance and employer contributions, assuming they started with a $50,000 annual salary3.
| Net Benefit Outcomes | |||
|---|---|---|---|
| Over 5 years | Over 10 years | Over 15 years | |
| AustralianSuper - Balanced | $22,560 | $78,012 | $184,785 |
| All super funds (average) - Balanced | $20,288 | $63,901 | $156,366 |
| Retail super funds (average) - Balanced | $18,348 | $55,362 | $132,198 |
Net benefit refers to investment earnings to 30 June 2024 (less administration, investment fees and costs, transaction costs and taxes). Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.
Compare super fund performance
To compare funds for free, you can use the ChantWest Super AppleCheck tool via the AustralianSuper website. This tool lets you see up to 3 super funds side-by-side.
Understand super fees and what they cover
A super fund is responsible for managing and investing your money. Super funds charge administration and investment fees and costs to cover the expense of these services, but not all funds charge the same or in the same way.
Some super funds charge a set fee and some charge a percentage of your account balance – while some charge a combination of the two.
Just like performance, you can use the ChantWest Super AppleCheck tool to compare funds’ fees side-by-side.
It’s important that you check that you’re not paying more in fees than you are paying into your super. Expensive fees can eat into your super savings and over time negatively affect your balance.
EXPLORE: AUSTRALIANSUPER FEES AND COSTS
Keep on top of your super
Check both your pay slips and your super account regularly to make sure you’re receiving your super contributions and to keep on top of your balance. If you’re an AustralianSuper member you can download the free mobile app to keep track of your super, check your investment performance and review your insurance.
Now you know what’s important about choosing your first super fund, compare how funds perform so you can make the right decision.
References:
- Before adding to your super, consider your financial circumstances, contribution caps that may apply, and tax issues. We recommend you consider seeking financial advice.
- AustralianSuper Balanced investment option compared to the SuperRatings Fund Crediting Rate Survey - SR50 Balanced (60–76) Index to 30 June 2024. Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns. Returns from equivalent investment options of the ARF and STA super funds are used for periods before 1 July 2006.
- Comparisons modelled by SuperRatings, commissioned by AustralianSuper. The outcome shows the average difference in ‘net benefit’, a measure of past investment returns after administration fees and costs, investment fees and costs, transaction costs and taxes have been taken out. The results compare the AustralianSuper Balanced investment option and comparable balanced options, for historical periods to 30 June 2024. Insurance premiums and other fees and costs may also apply. Outcomes vary between individual funds. See Assumptions for more details. Investment returns aren’t guaranteed. Past performance is not a reliable indicator of future returns.
This may include general financial advice which doesn’t take into account your personal objectives, financial situation or needs. Before making a decision consider if the information is right for you and read the relevant Product Disclosure Statement, available at australiansuper.com/PDS or by calling 1300 300 273. A Target Market Determination (TMD) is a document that outlines the target market a product has been designed for. Find the TMDs at australiansuper.com/TMD
AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.