Should You Have Multiple Superfunds? Keys to Better Retirement Outcomes

Superannuation is one of the most significant financial assets many Australians will accumulate in their lifetime. However, with job changes and various life events, it's not uncommon to end up with multiple super accounts. While this might not seem like a big deal at first, having several superannuation funds could be draining your savings in ways you might not realise. Consolidating your super into one account can help streamline your finances and potentially lead to a bigger retirement nest egg.

But is it always the right choice? Here’s a breakdown of the benefits, traps, and essential considerations before consolidating your super.

Why Consolidate?

1. Save on fees

Every superannuation account charges fees for administration, investment management, and sometimes even transactional services. If you have more than one super fund, you are paying fees on each account. Over time, these extra costs can erode your retirement savings.

• Example: If you have three super accounts and each charges an annual administration fee of $100, that's $300 in fees per year for services that could easily be managed by one account.

Consolidating your super means fewer fees, which can directly increase the balance of your retirement savings. By reducing the administrative costs associated with multiple accounts, you allow more of your money to stay invested and benefit from compound growth.

Impact on Retirement Savings: Let’s consider the following scenario:

• You’re 35 years old with 3 super accounts.
• Each account charges $100 in administration fees annually.
• Your super balance is currently $50,000, and you plan to retire at age 67.
• Assuming an average annual return of 8%, those $300 in annual fees could make a big difference over time.

If you keep paying $300 in fees every year across multiple accounts, you could be losing approximately $35,000 by retirement due to a combination of reduced contributions and lost investment returns. Consolidating your super early could potentially add this amount to your retirement nest egg.

2. Simplify your strategy

When managing multiple super funds, it can be challenging to keep track of your overall investment strategy. Each account could have different investment options, asset allocations, and performance metrics, making it hard to get a clear picture of your retirement savings.

By consolidating your super, you simplify your investment approach. It becomes easier to track performance, review asset allocation, and ensure your strategy aligns with your long-term financial goals.

3. Reduce insurance premiums

Each superannuation fund often comes with its own insurance cover, including life insurance, total and permanent disability (TPD), and income protection. If you have several super accounts, you could be paying for multiple insurance policies—sometimes without even realising it.

While having insurance is important, paying for coverage you don’t need can quickly add up. Consolidating your super helps ensure you're only paying for the insurance you require and not doubling up on premiums.

• Example: If you’re paying $200 in insurance premiums across three accounts, you’re spending $600 annually. By consolidating, you can reduce or eliminate redundant insurance policies, saving you significant amounts over time.

4. Grow your retirement savings faster

The power of compound interest means the more you save, the faster your wealth grows. When you have fewer fees and premiums eating away at your super balance, more money remains in your account, compounding over time.

For instance, a 30-year-old worker consolidating their super accounts could save thousands of dollars in fees over the course of their working life. These savings, when invested, could amount to tens of thousands more by the time they retire.

Things to Consider Before Consolidating

While there are many advantages to consolidating super, it's not always a straightforward decision. Here are some important factors to consider before making the move:

1. Check your insurance cover

Super funds typically offer default insurance, but coverage can vary between funds. If you're thinking of consolidating, make sure the account you're planning to keep offers adequate insurance cover for your needs.

• Tip: If you have a pre-existing medical condition, consolidating could affect your ability to maintain cover. Check with your fund to ensure that switching won’t require new underwriting or medical tests, which could make obtaining affordable cover more difficult.

2. Employer contributions

If your employer is contributing to one of the accounts you're planning to close, you’ll need to notify them and provide the details of your chosen super fund. It’s crucial to ensure your contributions are redirected to the right account to avoid any disruption in your super payments.

3. Consider your investment options

Consolidating super isn't just about saving on fees; it's also an opportunity to review how your money is invested. Different super funds offer a range of investment options, from conservative to aggressive growth strategies. Take this chance to align your investment choices with your risk tolerance and retirement goals.

• Tip: Some super funds offer specialised options like socially responsible or sustainable investment choices. If this is important to you, consider which fund offers the best alignment with your values.

4. Think about the future

While you might currently be in the accumulation phase, it’s important to think ahead to your retirement. As you approach retirement age, your focus will likely shift from growing your super to using it as a source of income.

• Tip: Check if your chosen super fund offers flexible income stream options or other retirement benefits that can support you as your needs change.

5. Defined benefit or untaxed funds

If you're in a defined benefit super fund (commonly offered by corporate or public sector funds) or an untaxed super fund (e.g., GESB or other public sector funds), think twice before consolidating. These funds may come with specific retirement benefits or higher payouts that you could lose by switching. It’s worth seeking professional advice before leaving these types of funds.

6. Retirement bonuses or balance boosters

Some super funds offer incentives like “retirement boosters” or “balance boosters” if you keep your account with them until retirement. Check with your current fund to see if you’re eligible for any bonuses and consider whether it’s worth holding off on consolidation until you can take advantage of these benefits.

7. Post-tax contributions and tax deductions

If you've made a post-tax contribution to your super and intend to claim a tax deduction, make sure to submit a Notice of Intent form and receive acknowledgement from your fund before transferring your balance. Once the funds are transferred, you won’t be able to claim a tax deduction for those contributions.

How to Consolidate Your Super

Consolidating your super is easier than ever. Using the myGov portal, you can view all your super accounts linked to your tax file number, including lost or inactive accounts. From here, it’s a simple process to transfer multiple balances into one account:

1. Log in to your myGov account or create one if you don’t have it.
2. Link your myGov account to the Australian Taxation Office (ATO).
3. Click on 'Super' to view all your superannuation balances.
4. Select the 'Transfer super' option to consolidate your accounts.

Finding Lost Super

It’s possible that some of your super has been transferred to the ATO if your account has been inactive for a long time. The good news is that the ATO’s super consolidation tool makes it easy to track down lost super and bring it into your current account. You might be surprised by how much extra retirement savings you’ve forgotten about.

Consolidating your super can lead to significant savings in fees and insurance premiums, helping you grow your retirement balance faster. However, it’s essential to carefully consider your insurance needs, investment options, and employer contributions before making a decision. A financial adviser can guide you through the process, ensuring your super is set up in a way that aligns with your long-term goals.

Taking the time now to consolidate your super could pay off significantly in the future, providing you with a clearer path toward a comfortable retirement.

Whether you have questions, need guidance, or just want to share your thoughts, please feel free to reach out. I genuinely value the opportunity to work together and assist you in reaching your financial goals.

General advice disclaimer.

The information in this Article is of a general nature and does not take into account your own financial objectives, circumstances or needs. You should consider your own personal situation and requirements before making a decision. If you have concerns or questions, please contact me/us.