If you have changed jobs a few times through your working life, you might find yourself with multiple super accounts.
This is not uncommon, as around 4 million Australians also have more than one. There are pros and cons to having multiple super accounts so it’s a good idea to understand your options.
You’re allowed to hold more than one super account, and this can have its benefits. You might want to keep multiple insurance covers, increase your variety of investment options, or if your super is in a defined benefit fund, you can retain your defined benefit entitlement. However, there are some disadvantages, like paying more than one set of fees, keeping track of more balances, investments, and retaining (and paying for) unwanted insurance cover, plus you’re at risk of ending up with lost super accounts.
Why people have multiple super accounts
Not consolidating super accounts
Not knowing you can consolidate your super could be a reason why you have more than one. But don’t stress, it’s easy to combine super. You can often do it through your online super account with your preferred fund, or through your myGov account. Simply link it to the Australian Tax Office (ATO) and see what super accounts are connected to your tax file number. If you’re unsure about anything, it’s important to get financial advice before consolidating your super accounts as there may be fees and taxes that arise, the loss of opportunity to transition insurance cover, and other things to consider.
Changing jobs frequently
If you have changed jobs a few times, there’s a chance that you might have multiple superannuation accounts. This is because employers have a default super fund they contribute to, and if you didn’t give your employer your super fund’s details when you started, prior to November 2021, they might have created an account for you.
Personal choice
You can choose to have more than one super account, and some find doing so easier to manage. You might do this if you want to increase your investment options or take advantage of insurance cover in a certain fund. Insurance from multiple funds can be paid out, however, some benefits like income protection may be reduced or not payable if you’ve received other income protection payments. Make sure you read the relevant product disclosure statement to find out more about insurance cover.
Drawbacks of having multiple super accounts
Increased fees and charges
Most super funds charge a variety of fees related to your super account. If you have more than one super account, you’re most likely paying these multiple times! Super funds will also often provide you with automatic default insurance cover like life insurance (also called death cover), total and permanent disability insurance (TPD) and income protection insurance if you meet certain eligibility criteria so you’re probably paying multiple premiums for cover that you may not actually need or be eligible to claim.
Complications in paperwork and admin
Another reason to combine your super into one account is to make it easier to manage your personal details. Keeping things like your address, email or a name change and your nominated beneficiary up to date makes it less likely for you to lose super. There’s also going to be less paperwork in terms of annual statements and fund reports.
Potential for lower retirement savings
Having your super spread out across multiple accounts can make it harder to track the growth of your money, or make good investment choices on top of paying multiple fees and insurance premiums. This can leave you at risk of low retirement savings.
If you want an estimate of your super balance and the income this can provide at the time of your retirement, try our retirement savings calculator.
How multiple accounts could cost you
In simple terms, you’re probably losing money by having more than one account. If we look at paying a $100 fee each year on a second account from age 27 to 67. You could miss out on up to $25,000 on your balance at retirement, depending on investment returns.
If you add the cost of insurance premiums to a second account (also from age 27 to 67), you could miss out on a further $100,000 on your balance in retirement depending on investment returns.
These figures are based on the following assumptions:
- Admin fee = $100 p.a. increasing with inflation (2.5%)
- Insurance premium = $315 p.a. increasing with wage inflation (4.0%)
- Net investment returns = 6.3% p.a. (assuming roughly balanced)
Consolidate your super
There are some good reasons to combine your super accounts, because it can help keep track of your super and there’s less paperwork to manage.
Before you start consolidating your super, make sure you check whether it’s worth transitioning your insurance cover, keeping that account open because your employer only covers fees or premiums associated with that fund, or if there are any fee or tax implications. You can read more about this and how to consolidate your super here.
Things to look out for when comparing super funds
Investment options & performance
Super is a long-term investment, so, it’s a good idea to look at different fund’s investment options as well as their long-term performance* and compare them before making a decision that’s right for you.
Fees & costs
Superannuation fees help cover the cost of running the fund as they manage and invest your money. You ideally want a low-fee super fund that delivers high long-term investment returns.
Insurance options
It’s important to look at what insurance cover you currently have, and whether a different super fund will give you the level of cover that suits your needs.