I would like to know how to change to Australian super. I am 75 years of age. I draw a pension of aprox $695 per month My super balance has dropped from $116,595 in 2019 to $100,595 as my latest balance, Will I lose more money by transferring out ? Can I change my monthly payment upon changeover?

Hi Sergio,

Thanks for your question.

For the purposes of my answer I have assumed that your superannuation is just a normal superannuation account in pension drawdown phase, i.e. there are no defined benefit or other complications to be considered.

How to change superannuation providers is a question we are asked all the time, particularly in times of falling markets. We don’t have any detail about your current provider, but the following are issues which you need to consider when making a decision, regardless of who the incumbent provider is, or the alternative provider you choose.

First and foremost, you need to remember that superannuation of itself is not an investment, it is merely a tax-effective vehicle by which you can hold investments to fund your retirement. The performance of your fund in different markets will be significantly impacted by the investment model you have chosen within your superannuation account.

Secondly, all investment markets were impacted by the downturn in March of this year. The degree to which your superannuation account was impacted will have been affected by your fund’s level of exposure to growth assets such as shares. The higher the exposure, the greater the impact on your superannuation balance. To illustrate this, the “Australian Shares” option in Australian Super produced a negative 5.7% return in 2020, whilst the Balanced Option returned about +0.5%.

Thirdly, your superannuation provider will probably not be “managing” all of your investments directly. Most providers will outsource the management of parts of your portfolio to other managers who are highly skilled in managing particular assets. Australian Super for example uses a mix of in-house and external fund managers to manage members’ super. It could even be that Australian Super is using the same managers in some asset classes as those used by your existing provider. In this situation, you may be changing provider for no benefit.

Fourthly, it is quite difficult to compare fund performance. The only way we can properly do this is by comparing providers using the same mix of assets in the investment model you choose, and this is not always easy to do. One fund’s “Balanced” portfolio might have quite different characteristics to another for example. Which investment option you choose depends on your attitude to risk and a range of other factors peculiar to your situation. It is definitely not one size fits all.

Finally, the costs associated with looking after your super can vary considerably from one provider to another, you should be aware of the costs you are incurring, and compare them with the costs on an ongoing basis of any new provider you choose.

In relation to changing your monthly payment, this would certainly be possible at any time, but you need to have regard to the minimum pension you must draw under government legislation. In normal circumstances at your age, you must withdraw 6% of your super balance each year, though this has been reduced to 3% as part of the government response to the COVID-19 pandemic. The $695 per month you are presently withdrawing could be reduced to around $500 per month in normal circumstances or $250 per month with the COVID temporary concession. There is no maximum amount you can withdraw.

It is usually comparatively easy to move from one provider to another, but there may be costs in doing so. The only way to tell is to check the Product Disclosure Statement (PDS) of your existing provider to check for any fees payable upon exit.

Australian Super may well be the appropriate provider for you. It is one of the largest funds in Australia and has significant resources to help manage your super, but it is important to remember that whilst it is widely known, it is not the only option available to you. Choosing the best fund for you requires analysis of your needs, before identifying which fund will provide you with the results you are looking for.

The ease of moving your super should not mean that you take the decision to do so lightly, you really need to consider carefully the issues above. A chat with a financial adviser will come at a cost but will help you work through all of the issues and give you some peace of mind.

Kind Regards,

Paul Wright