This page answers the following questions about Choice of Superannuation Fund. You can click on any one of the questions or scroll down through the whole page.

What is Choice of Superannuation Fund?

Why has Choice been introduced?

Who does Choice of super apply to?

Do you have to make a choice?

How do you make a choice?

What is the Standard Choice form?

What happens if I do nothing?

What do you need to take into account if you are considering changing funds?

How do you find out about a superannuation fund's fees and charges?

How could changing superannuation funds affect your insurance cover?

How can you find out if a superannuation fund is the right one for you?

What is Choice of Superannuation Fund?

Choice of Superannuation Fund or 'Choice' refers to legislation passed by the Federal Government in June 2004, which allows employees (with some exceptions) to choose a complying superannuation fund or Retirement Savings Account, into which their employer pays their compulsory 9% Superannuation Guarantee (SG) contributions. Choice of Super came into effect on 1 July 2005.

Why has Choice been introduced?

The Federal Government has introduced Choice of Super to encourage people to take a more active role in the management of their superannuation. For most Australians superannuation will be the primary source with which they will fund their retirement and the biggest asset they own outside of their home.

Who does Choice of super apply to?

All working Australians will be offered Choice of Super apart from those who:

• are covered by a State Award that specifies a particular fund such as an industry fund
  
  
• are covered by an Australian workplace Agreement that specifies a particular fund such as a corporate fund or industry fund
  
  
• are covered by a Certified Agreement that specifies a particular fund
  
  
• remain members of a defined benefit fund
  
  
• are covered by and employment agreement in force under the Victorian Employer Relations Act 1992.

Some government employees are also ineligible. These are:

• Government employees who are members of the Commonwealth Superannuation Scheme (CSS) or Public Sector Superannuation Scheme (PSS)
  
  
• Government employees in an unfunded public sector super scheme.

The Government has estimated that this will equate to 4.82 million employees and 654,000 employers who will be affected by Choice of Super.

Do you have to make a choice?

Under the Choice of Super legislation you have two options:

Option 1

Do nothing and you will remain in your employer's nominated default fund. In many instances this will be the superannuation fund that your employer currently pays your SG contributions into. The default fund can be any complying superannuation fund or Retirement Savings Account chosen by your employer.

Option 2

Complete the Standard Choice form and nominate a complying superannuation fund or Retirement Savings Account, into which your employer will pay your future SG contributions on your behalf.

If you do decide to exercise your right of choice, you will need to provide your employer with confirmation that the superannuation fund you have nominated is a complying fund and will accept contributions on your behalf.

How do you make a choice?

If you are eligible to make a choice under the new legislation your employer was required to provide you with a Standard Choice form before 29 July 2005. If you begin working for a new employer , they must provide you with a Standard Choice form within 28 days of you commencing employment. Employers must also provide you with a Standard Choice form upon your request unless you have been offered Choice of Super within the previous 12 months.

If you decide to choose a different fund to your employer's default fund, you need to complete section two of the Standard Choice form. This section of the form must contain your fund's ABN, superannuation product identification number (SPIN) and a letter from your trustee verifying that the fund is a complying superannuation fund that will accept contributions from your employer.

What is the Standard Choice form?

There are three sections within the Standard Choice form. The first section is to be completed by your employer and advises you of the name of the default fund your superannuation contributions will be paid into, should you not make a choice.

The second section is to be completed by you. In this section you need to nominate to have your contributions made to your employer's default fund, or you can nominate your own complying superannuation fund or Retirement Savings Account.

The third section is for your employer to record the dates that they received and processed the Standard Choice form as an aid to proving their compliance with the Choice of Super legislation.

What happens if you do nothing?

If you decide not to exercise your right to choose a superannuation fund, your employer will pay your SG contributions into their nominated default fund. Your employer's default fund must meet the minimum requirements for life insurance cover.

What do you need to take into account if you are considering changing funds?

If you are considering changing funds, you need to make sure you are being given enough information to properly compare any offer from another superannuation fund with your current fund. You will need to consider things like the following:

• What are the fees and charges?
  
  
• Does this fund offer good insurance cover and do you understand the what the cover entails?
  
  
• What is the investment performance now, and in the medium and long term?
  
  
• Is the range of investment choice suitable for your needs?
  
  
• What member services does the fund offer?
  
  
• Do you need financial advice in relation to your Choice of Super?

How do you find out about a superannuation fund's fees and charges?

It can be very difficult for the average person to make true comparisons between various types of options that superannuation funds offer. Since 1 July 2005, Product Disclosure Statements of superannuation funds must contain standardised fee disclosure including worked examples, in order to help you make an informed decision.

You also need to consider just what you are receiving for the fees that you pay. For instance, many industry funds offer $1 per week insurance. However, this often provides an extremely low level of cover, which may not be suitable for your needs.

How could changing superannuation funds affect your insurance cover?

If you are considering changing your superannuation fund, you need to familiarise yourself with the insurance cover that you currently have with your existing superannuation fund. Like investment fees, insurance fees can vary widely. From style of pricing - formula driven (5 x salary) or cost driven ($1 per week) - to group versus personal, there are many different options and premiums available.

As such, you need to consider the effect that changing funds will have on the cost of your cover, the level of cover that you will be able to obtain and whether you will need to provide a personal statement or medical evidence in order to get insurance cover through another superannuation fund.

How can you find out if a superannuation fund is the right one for you?

Many people simply compare the past performance of superannuation funds when considering whether it is suitable for them, even though this is not a good indicator of future performance. The best way to compare superannuation funds is to obtain the assistance of a financial adviser who will be able to help you make an informed decision regarding your investment choice.

If you would like the assistance of a financial adviser to help you review your superannuation and insurance needs, contact us at Strategic Financial Solutions today and speak to one of our advisers.

Source: ASGARD Capital Management Ltd publication "Choice of Super - Everything you need to know".