Where to start when choosing your employees’ default super fund
21 May 2019
5
min read
In the first of this two-part mini series, Canstar’s Group Executive of Financial Services Steve Mickenbecker discusses the importance of putting the necessary due diligence into choosing your employees’ default super fund.
It’s hard to overstate the importance of carefully considering the default super fund you offer your employees. That is, the fund where your employees’ super is invested if they don’t choose their own fund.
It’s arguably as important as deciding how much to pay your employees, given the potential effect a super fund’s fees and performance can have on an individual’s financial wellbeing in retirement.
But where do you start when making this important decision?
You could think of it like hiring a crucial new employee for your company. Their past performance, the cost (salary, expenses, training etc) and any extra benefits they bring to the table are all likely to be factors you may consider. Chances are you would look at several candidates, scrutinise their CVs, ask questions at an interview, speak to referees and complete other aspects of due diligence before making a decision.
Taking a similarly thorough approach when selecting a default super fund for your employees may be beneficial. After all, for those employees who place their super savings in your nominated default fund, it could make a huge difference to their financial security in retirement.
Historically, some employers may have chosen superannuation funds based on ease of use at the administration side, such as how seamlessly the fund works with their payroll system or external payroll provider. In some other cases, simply the sector in which an employer operates can help steer the decision towards the relevant industry super fund.
But like most aspects of running a business, superannuation is not always straightforward, and it can take some consideration for employers to find a fund that best meets the needs of their workforce.
In the next part of this mini-series, I’ll explain how to distinguish between different super funds based on the fees they charge, the performance they have demonstrated, and the services and insurance policies they offer. But first, let’s look at some of the basic criteria a product must meet before you can nominate it as your default employee super fund.
Criteria a default super fund must meet
In order to nominate an eligible default fund for your staff, the Australian Taxation Office (ATO) says a super fund must be:
a complying fund that meets specific requirements and obligations under Australian super law. Consider checking with the fund’s trustee for confirmation that it is a complying fund. You can also use the government’s Super Fund Lookup tool.
Registered by the Australian Prudential Regulation Authority (APRA) to offer a MySuper product.
In addition, you should note the ATO’s advice that it is illegal for a super provider to offer employers incentives to use their fund.
About Steve Mickenbecker
Steve Mickenbecker is the Group Executive – Financial Services at Australia’s biggest financial comparison site, Canstar. He has decades of experience in the finance sector and is passionate about helping consumers make informed decisions with their personal finances.
The views of Steve Mickenbecker are not necessarily the views of the QSuper Board (ABN 32 125 059 006) and reflects their own personal circumstances so their choices and outcomes may be different to yours.