They say that we will change careers five times in our life. But how many times do we change jobs? Every time we change a job we need to provide our superannuation fund details to our new employer. Individuals who are not engaged with their superannuation have a tendency not to forward on their superannuation details to their new employer. As a result their employer establishes a new fund for them. Over time they may have built a collection of four or five superannuation funds all with low balances.
Many default employer super funds tend to have fixed fees associated with them. When the superannuation balance is low these fixed fees make up a larger ongoing cost which could be greater than what the fund earns you. If you have collected several funds overtime you might find you are paying several of these fixed fees across multiple funds instead of the one fixed fee from a single fund. For example if the fixed annual administration fee is $100 per fund and you have five different funds you could potentially be paying $500 a year as compared to $100 if you had a single fund.
Furthermore, many of the default superannuation funds may provide you with insurance cover that you may not have necessarily applied for, but are paying for. You may find that you have salary continuance (income protection) in multiple funds. Quite often insurers will not pay out on multiple salary continuance policies. So you may be paying premiums on something you cannot claim on. How would you feel paying for three car insurance policies knowing that you would only ever get one new car in the event of an accident?
Call to action:
- If you CHANGE employers, contact your superannuation fund and ask for a ‘superannuation fund nomination form,’ complete and provide this to your new employer. This will avoid a new fund being opened for you.
- Understand the insurance cover within your superannuation fund. Make sure you are not paying for something that might not cover you.
- Consider consolidating your existing superannuation funds into one.
- Seek advice from a financial planner, they may help you explore your financial and lifestyle goals. Advice may cover the consolidation of your superannuation and help you understand insurance cover and how it relates to your goals and objectives.
RSM Financial Services Australia Pty Ltd (AFSL 238 282)