What is a default super fund?
27 February 2020
5
min read
It’s an important decision for employers, and there are many elements to consider.
The process of choosing a default super fund to offer your employees begins with understanding the basics.
A default super fund (also known as an employer super fund) is a fund that you will pay employees’ super into if they can't or don't choose their own fund.
The super fund you nominate must be a complying fund (one that meets specific requirements and obligations under super law) and must also be registered by the Australian Prudential Regulation Authority (APRA) to offer a MySuper product. Selecting a default super fund is an important decision, not just an obligation. Your choice of fund could impact on you from an ease of administration point of view, your employees in terms of their financial wellbeing and your business productivity.
Your default super fund can impact employee financial wellbeing
As an employer, choosing a default super fund for your employees is a significant decision that could affect their financial wellbeing in the short term and the long term.
The long-term impact relates to overall returns, and offering employees the best chance of accumulating a large enough pot of retirement funds. Suitable funds will have strong 10-year investment returns and low member fees. Profit-for-member funds can be a good choice as they act for the benefit of members, not shareholders.
Some default super funds can also contribute to employees’ more immediate financial wellbeing through financial literacy programs. Look for a fund that offers these at no cost to you as the employer, with options for tailoring programs specifically to the needs of your team.
Ease of admin counts when selecting your default super fund
Your choice of super fund can also impact your business from an administrative point of view. So there are a few key factors to consider when choosing a default super fund.
Having access to a dedicated team tasked with helping employers manage their Superannuation Guarantee (SG) obligations as seamlessly as possible makes a big difference. You should also seek out a fund that allows employers who nominate the fund as their default to make all their employee super contributions (including to other super funds) in one place.
What is SuperStream and what are clearing houses?
Understanding key elements of superannuation is vital for all employees. Let’s break down a couple:
SuperStream is the way businesses must pay employee Superannuation Guarantee contributions to super funds. SuperStream transmits money and information consistently across the super system between employers, funds, service providers and the ATO. There are a range of penalties for not complying with the SuperStream obligations.
If your current super payment and information reporting method does not meet SuperStream requirements, your tax agent, bookkeeper or QSuper can help you to become SuperStream compliant.
A clearing house transfers super contributions to your employees' super funds for you. You send a single electronic payment to the clearing house, together with the contribution information for all your employees, and the clearing house does the rest. If you have 19 or fewer employees, or a turnover of less than $10 million a year, you can use the ATO's free Small Business Superannuation Clearing House (SBSCH).
Superannuation is more than an obligation
Insightful employers know that superannuation is not just an obligation but an untapped opportunity that can support employee acquisition, retention and productivity. A generous super package, and a super fund that supports your employee’s long-term financial wellbeing, means you can play a significant role in helping set up a loyal and valued staff member for life after work.
Find out more about your super responsibilities.