Advantages of Consolidating your Super

These days it often seems like life gets more and more complicated, and nowhere is this more evident than in our finances. We have multiple bank accounts, a bevy of cards associated with them clogging up our wallets and the ubiquitous PIN numbers that clog up our minds! Then of course there’s the mountain of fees that come with this territory.

Not only is complexity harder to manage but it also leaves us more open to identity fraud. Anytime you can streamline your financial picture without hurting yourself most planners would urge you to do so. One of the areas of inefficiency can be your super accounts as a lot of people have these on a sort of “set and forget” mind set, wrongly believing because they can’t access their money until retirement they also can’t be dynamic in organising their funds.

If you have multiple super funds the advantages of consolidating them into one are many.

Firstly, and this is a biggie, you will save on incurring multiple sets of fees that can eat into your retirement savings.

You’ll also of course be better able to monitor:

  • The amount of deposits you are putting in each year
  • The way your money is performing
  • The overall risk your funds are exposed to
  • Putting in place tax optimised planning strategies
  • The insurance cover you have within super
  • The total fees your are paying

So how do you decide on the account to consolidate into?

Well you have to consider the following:

The level of flexibility and investment control you want whether this is in a Retail Fund or Industry Fund.

If you want to run a pension account for instance, you’d need to know the fund provided this service.

You need to also determine how cost effective the fund is. Many people only look at the investment performance, but you need to be very conscious of the fees charged.

Ok so how do I go about it?

It’s a bit different from fund to fund but standard practice is you have fill out a consolidation or request to transfer superannuation benefits form and provide the right ID.

When you’re rolling funds out:

  • Make sure your current employer can contribute funds to the account
  • Ensure compulsory super guarantee payments have been redirected
  • Make sure any strategies you had in place for claiming tax benefits are completed before the consolidation.

There are also times when you shouldn’t consolidate

  • When you face significant exit fees from a particular fund
  • If insurance cover you have in a particular fund will be adversely affected or cancelled
  • If your employer is rebating the fees or insurance premiums on your fund
  • If the fund’s investment strategy is too risky for you

As you can see there are more than a few considerations to take into account with this process.

Published on June 6-th, 2015 in Superannuation
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.