If you've ever stared at your superannuation statement and felt a tad confused, you're not alone. Managing your super can sometimes feel like trying to solve a Rubik’s Cube. Should you consolidate multiple super accounts into one place, or consider switching to another fund? The choice is up to you, but’s not always straightforward. That’s why we’ve put together this article to help you navigate your options.

We’ll delve into these reasons why you might (or might not) want to consolidate or switch your super. We also cover the key information you need to help you decide what’s the right move for your financial future. Let’s look at what you need to consider before you make any changes to your super!

What are superannuation funds?

When you’re planning for retirement, one of the biggest tools in your arsenal is your superannuation fund – or simply, your super. A super fund is like a savings account specifically for your retirement. Your super fund account holds some of the money you’ve worked hard for and invests it to grow your super over time.

This is how it works: each payday, a portion of your salary dutifully disappears into your super fund. Over the years, this balance generally grows – thanks to both your regular contributions and the magic of compounded returns . By the time you retire, the goal is to build up a nest egg to fund your lifestyle when you’re no longer working.

Why would you consider tinkering with such an essential component of your financial future? There are a few common reasons why people consider consolidating or switching their super funds. They include reducing fees, making your super easier to manage, seeking higher returns and accessing more features and services.

Let’s first take a closer look at the benefits of consolidating funds.

Benefits of consolidating super funds

Consolidating your super might seem like a chore, but it comes with a few benefits that can potentially make your financial life easier. Here are some of those benefits:

• Easier tracking. Trying to juggle multiple balls at once can get tricky. The same applies to managing several super funds. By consolidating, you have just one account to track. This simplification can make it easier to monitor your super balance and keep an eye on its growth.
• Potential cost savings on fees. Multiple super accounts often mean multiple sets of fees. These fees can eat into your retirement savings over time. By consolidating your super funds, you could save money on these fees. With fewer accounts, there are fewer administrative and management fees draining your hard-earned money.
• Simpler to manage and plan. Having a single super fund can help make retirement planning more straightforward. It’s easier to see where you stand and how far you have to go to retire comfortably . With everything in one place, you could have a clearer picture of your financial future.

Now, if you only have one super fund account, we may have almost lost you here – but don’t tap out yet. Let’s explore the option of switching super funds.

Benefits of switching super funds

If you’re looking to get the most out of your super, you might consider seeing how your super fund stacks up compared to others. And that could lead to switching super funds. Here are a few reasons why some Aussies make the leap:

• Access to better-performing funds. Switching super funds might give you access to better-performing investment options. This means your money could potentially achieve higher returns, helping you save more for retirement.
• Possibly lower fees. Nobody likes to see their hard-earned money trickling away in fees. So, some people decide to switch super funds to find lower fees. Different funds have varying fee structures, and some might be more cost-effective than others. Lower fees can mean more of your contributions stay invested, working hard to grow your balance.
• Better alignment with personal values. If your current super fund doesn’t match your values, you could consider switching to one that does. Many super funds now offer ethical or sustainable investment options that can add an altruistic factor to your retirement savings strategy.
• Improved features and services. Some super funds offer features and services that add more value or make managing your super simpler. This could include better insurance options, user-friendly online tools, or more responsive customer service.

While these reasons may inspire you to switch, be sure to weigh all factors carefully and consider seeking advice before making a decision.

When not to consolidate or switch

While consolidating or switching super funds can be beneficial, it’s not always the best choice. Here are some scenarios where you might want to pause and think before making any changes.

Potential exit fees or penalties

Some funds charge exit fees or penalties when you withdraw your money. These costs can eat into your super balance and leave you worse off. Always check the fine print before making any decisions.

Loss of insurance benefits

Many super funds include insurance benefits like life, total and permanent disability, and income protection. If you switch funds, you might lose these benefits or face higher premiums. This is especially important if you have existing medical conditions. Alternatively, you may want to consider insurance outside of your super that includes other coverage, such as trama insurance. It’s important to review your current insurance cover before switching.

Defined benefit plan

Some super funds can be defined benefits funds, in which retirement benefits are calculated by a predetermined formula. Retirement benefits are usually calculated using the average salary over the last few years before retirement, along with the number of years worked at the company or public service. In some cases these funds can be very generous, in which case you may be better off staying with the defined benefit fund. This is a situation where it's best to get professional advice before making a decision.

Investment options or performance

Not all super funds are created equal. Some might offer better investment options or have historically performed better than others. If you switch to a different fund, you might miss out on beneficial investment opportunities. But remember, past performance doesn’t determine future performance.

Tax implications

Switching funds could have tax implications , especially if you’re considering retirement or have unique financial circumstances. It could impact the timing of capital gains taxes and other tax-related matters. It’s worth discussing this with a licensed tax accountant or financial adviser.

Diversifying risk

In some cases, having multiple super funds might help you diversify risk . Different funds might invest in various asset classes, spreading your risk across diverse investments. This approach can be beneficial, particularly during times of market volatility.

Steps to take before making a decision

If you’re considering switching or consolidating super funds, here are some steps to help you make an informed decision:

1. Compare fees, performance, and features: Look at your current fund’s fees and compare them with potential new funds’ fees. Check past performance, though remember it’s not always a predictor of future returns. Also, explore the extra features like online tools and insurance options.
2. Check for exit or entry fees: Some funds charge fees to exit or enter. Be sure these costs don’t outweigh the potential benefits of switching. Review your current fund’s fee structure alongside any new fund you’re considering.
3. Consider the impact on insurance coverage: If your current super fund includes insurance, you need to see how changes might affect it. Sometimes, switching funds can reduce your insurance benefits or lead to new certification requirements based on your health. Alternatively, you may even seek insurance outside of your super.
4. Seek professional financial advice if you’re uncertain: Do you have doubts or unique circumstances, like being in a defined benefit fund or having specific insurance needs? If so, professional advice can help. An adviser can provide clarity on complex details and guide you toward the best decision for your super.

Thorough research and careful consideration today can potentially lead to a more secure and comfortable retirement tomorrow.

Switching and consolidation in action

For a clearer picture of when consolidating or switching super funds might make sense, let's look at two hypothetical scenarios.

Scenario 1: The simplicity seeker

Delilah has three super accounts from different jobs over the years. She's tired of keeping track of multiple accounts, and the fees are starting to add up. So, she decides it's time to combine them.

Delilah spends time comparing the fees, performance history, and features of her existing funds. She discovers that one of her funds offers lower fees, better returns and comprehensive online tools. After confirming that her insurance won't be impacted, and that there are no hefty exit fees or negative tax implications, she consolidates her accounts into that fund.

By streamlining her super, Delilah now finds it simpler to manage her retirement savings. She's saving on fees and has a clearer view of her retirement goals with easier balance tracking.

Scenario 2: The careful conserver

Darren is considering switching his super funds because he's attracted to a fund that aligns closely with his personal values and offers lower fees.

Upon a closer look, Darren realises his current super fund includes valuable insurance benefits he might lose if he switches. His current fund has also performed consistently well in the market. He then notices potential exit fees that could offset any fee savings from switching.

Darren decides to consult with a financial adviser, who helps him understand the full impact of switching. After thorough analysis, he decides to stay with his current fund to keep his insurance benefits and avoid exit fees.

These scenarios illustrate the importance of evaluating all factors before deciding to consolidate or switch super funds. Everyone's financial situation and retirement goals are unique, and what works for one person might not work for another.

To switch or consolidate?

Deciding whether to consolidate or switch super funds is no small task. It involves understanding several key factors to ensure you’re making the right choice.

The benefits of consolidating super funds include simpler management, potential cost savings, and easier retirement planning. Switching super funds can provide access to better performance, lower fees, and features that align with your personal values. But before making any moves, also consider the downsides like exit fees, loss of insurance, and varying investment performance.

Take the time to compare super funds and if you’re uncertain, seeking professional financial advice can help give you confidence.

In the end, the best decision is an informed one.