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What is the best super fund?

Older woman and young woman discussing superannuation
Older woman and young woman discussing superannuation

When it comes to picking the best super fund, we can often feel overwhelmed by choice. We show you the top performing super funds for Australia to help you make the best choice for you and your retirement savings.

As a young person, I’m about to do something not many people my age do: talk about retirement. It’s something that is way too easy to put off. We’ve got years ahead of us to figure that out, we’ll put in the effort when we get a real job and it’s not really relevant to our lives.

However, if you want to get ahead, the time to think about retirement is right now.

 

Why should you care about retirement when you’re young?

Retirement money is like a snowball rolling down a hill. You start putting money away at the top of the hill and as it rolls down over time, it collects more snow and grows bigger, increasing or compounding over time. You might have heard this process referred to as compound interest as your money compounds and builds on what you already have each year.

What is superannuation?

Superannuation, otherwise known as super is how Australians save for retirement. It’s an enforced savings scheme for Australians of working age. Essentially nearly 10% of your pay cheque is put by your employer into a retirement or super fund that is either nominated by you or chosen by your employer. Most Australians who weren’t retired in the 90s have a super fund.

What are the best super funds?

When it comes to measuring which super fund is the best, we turn to the experts. One of these is SuperRatings, an organisation of superannuation experts specialising in ratings and research who are on a mission to close the information divide between us and our super funds. They also regularly provide comparisons of the top performers including the best returns and the lowest fees. The most recent ranking measure returns up to the end of June 2020 and its these results which are often looked at by media outlets because at the end of the financial year, you can see how different funds have performed over the past 12 months.

What were the Top 3 super funds for the year?

According to the data, the super funds producing the highest returns for the 12 months ending June 2020 were:

  • Suncorp Multi-Manager Growth Fund returned 3.8%
  • BUSSQ returned 2.5%
  • Australian Ethical Super returned 2.4%

If you’re wondering why those returns look lower than other years, it’s important to recognise that the stock market took a hit in 2020 during the COVID-19 pandemic, which would affect your super fund investments.

What were the Top 10 super funds for the decade?

Retirement is a long way off for many of us and you should look at the long-term performance of a super fund, including how it has performed over a 10 year period. According to SuperRatings, the super funds who provided the highest returns for the decade ending 30 June were:

  • Australian Super –Balanced returned 8.8%
  • UniSuper Accum – Balanced returned 8.7%
  • Hostplus – Balanced returned 8.6%
  • Cbus – Growth returned 8.5%
  • Care Super – Balanced returned 8.4%
  • Vic Super Future Saver returned 8.4%
  • Equip My Future – Balanced Growth returned 8.3%
  • QSuper – Balanced returned 8.2%
  • Vision SS – Balanced growth returned 8.1%
  • Mercy Super – MySuper Balanced returned 8.1%

You’ll notice that these returns over a 10 year period are higher than returns achieved in the past year because on average, the economy over the past decade had greater returns than what we have experienced in the past 12 months.

 

Should I change superannuation funds?

Before you reach for the phone or laptop to change your super fund, remember that this is all based on the past performance of funds. Funds change over time and can improve or reduce their performance in the future so how a fund performed previously isn’t necessarily how they will perform in the future.

The comparisons above all use returns or how much money a super Fund generates for you as their measurement. When choosing a super Fund, you should also look at fees charged by each fund. Many will take both a lump sum admin fee and also take out a percentage of money from your account total as fund management fee, with the percentage being what you need to watch as this can really cut into your retirement fund over time. It should also be recognised that SuperRatings is just one data provider and that there are other comparison sites that compare superannuation funds including Finder, CanStar and Morningstar.

This particular comparison looked at balanced funds only. A balanced fund sounds great – everyone likes the idea of balance. However, what this actually refers to is how your super fund assets are allocated and there might be a better asset allocation for you. For example, young people at the start of their career might be able to tolerate more risk and be better suited to a growth investment option. Older people closer to unlocking their retirement fund might prefer a conversation investment option as they are less likely to want to risk losing money.

Your super fund is an investment in future you.

Whether you retire into cashmere or acrylic, is the product of decisions you make now. As a young person, retirement may be the last thing on your mind right now. The flip side of this is that even taking a small amount of interest in your super fund now will pay off over time as when you’re young, you have 40 to 50 years of work ahead of you. You therefore have a huge opportunity to ensure that you’re saving some of what you earn now into a super fund that will give you the returns you’re looking for so that you retire with more money in your pocket. Invest the time now to get on top of your super. Your future self will thank you for it.

Read more:  Sort out your Super in 15 minutes

Written by Kate Crowhurst

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