After all these years together, you’ve decided to break-up with your super fund and you want to know how to transfer your super to another fund.
It’s not you, it’s them.
It’s even possible that you received a letter, begrudgingly sent by your super fund, admitting that they have underperformed and failed the Australian Government’s annual performance test. Believe me, they don’t want to do this, but they now have to under law.
For you, this can mean only one thing – get the hell out of there! After all, it’s Your Future, Your Super. But not so quick there tiger! Let’s take a look at everything you should consider prior to transferring your super from one fund to another to make sure you’re making the right decision.
Can I Transfer My Super to Another Fund?
You are generally free to transfer your super to another fund at any time. You can even hold your retirement savings with several funds, if you prefer.
Most super funds will accept anyone as a member and there is usually nothing stopping you from switching out of your current fund into a different one.
However, if you’re a government employee, or employee with a certain workplace agreement or defined benefit fund, you might not be eligible to choose which super fund your employer contributions are paid into. In fact, due to the calculation of defined benefits, you should be sure to seek advice before transferring funds out of these types of schemes if you already have one.
How Do I Transfer My Super to Another Fund?
Transferring your super from one account to another is a reasonably simple process. It generally requires a form to be completed with details of your current super fund and the new fund that you would like to send your superannuation savings to.
You should be able to obtain transfer forms from either your current or intended super fund website under the forms and documents menu. Alternatively, you can phone your super fund and ask them to send the relevant forms.
Insider tip: It is usually best to contact the super fund that you intend on transferring your super to and asking them what their process is. Think about it – they will be much more inclined to help you given that you will be transferring your balance to them.
Conversely, it is usually not best to initiate the transfer of your super balance with the super fund that you are transferring out of, as they are less likely to ensure a speedy and efficient process, knowing that you are leaving them.
If you plan on closing down a super fund and would like to transfer the whole balance to another super fund that you already have, you can use this ATO form. However, you cannot use this for partial transfers.
Here are some risks associated with rolling over your super:
How Long Does it Take to Transfer Super Funds?
Most super fund transfers will take anywhere between 1-3 weeks from the date the rollover forms have been submitted. However, on the odd occasion, it can take longer. You should contact your super fund weekly to receive an update on the progress and to ensure that they are not waiting on further information and that nothing has fallen through the cracks.
Reasons for Transferring Super
There can be a number of reasons for wanting to transfer to another super fund, but it’s important to make sure you’re doing it for the right reasons.
The most common reason people wish to transfer super is because they believe their super fund is not producing adequate investment returns (or they received a letter stating so). Yet there is something important to remember:
A super fund is not an investment, it is a super fund. Therefore, it’s not the super fund that is producing lower than expected returns, it is the investment option you have chosen within your super fund.
Even if you received the underperformance letter from your super fund, it relates to the investment option only. It is not necessarily all of the investment options offered by that super fund that have underperformed. Capisce?
Most super funds offer at least a dozen investment options to choose from, ranging from low-risk to high-risk. Some super funds offer hundreds of investments to choose from and even the ability to invest in ASX-listed shares.
So, before you kick your super fund to the curb, have a look at the other investment options available within your current fund and whether any are more appropriate for your needs, or perform better on a relative, risk-adjusted basis. This could save the heartache, costs and other risks of transferring your super.
Other reasons why you might want to switch super funds may include, cheaper fees, more investment options or better insurance options, to name a few. These can all be valid reasons, but make sure you first understand the risks and disadvantages of doing so.
Risks and Disadvantages of Transferring Super
Before you go all gung-ho on transferring your super to another account, consider these risks and disadvantages:
closing down a super fund can result in the loss of insurances within the account. It could be difficult or more expensive to obtain replacement cover, especially if you have had any health issues. If you are adamant you want to switch super funds. you might consider applying for new replacement cover before rolling over your super, or leaving part of the balance within your current fund, so that the account remains open and the insurance premiums can continue to be funded.
2. Super contributions
If you have made a contribution into your existing account and plan on claiming a tax deduction for it, you should notify your super fund of your intention to claim a tax deduction and receive subsequent confirmation from them, prior to transferring over your super to another fund. Otherwise, you risk missing out on the tax deduction.
3. Time out of the market
transferring your super to another fund will usually take a couple of weeks, but can take over a month in some cases. Therefore, your balance will not be invested and will therefore not earn an investment return over this period.
4. Transaction costs
You may need to sell investments within your current fund and purchase investments once your new fund receives the transfer amount. This can result in transaction fees, brokerage costs and buy/sell spreads, which are all deducted from your balance.
5. Investment returns
Just because one fund promotes how high their returns have been in the past, it does not necessarily mean they will achieve the same returns in the future. Chasing returns by switching super funds all the time can do more harm than good. Past performance is no guarantee of future performance.
What are the Costs to Rollover My Super?
There are no specific costs associated with transferring your super to another fund. However, you may indirectly incur fees, such as transaction costs.
You should also be mindful of any potential capital gains tax (CGT) implications associated with selling investments in your existing super fund.
Read more: How To rollover Super Funds
Can I Transfer My Super to My Bank Account?
You can only transfer your super to your bank account if you are eligible to access your super. To be eligible to access your super, you generally need to have at least met your superannuation preservation age. The amount of super you can access after attaining your preservation age is determined by your employment status.
You should seek advice prior to accessing your super; firstly, to ensure you are eligible and, secondly, to determine whether or not it is in your best interest to do so, because superannuation offers many benefits and it may be difficult to re-contribute funds to super once withdrawn.
Read more: What Age Can I Access My Super?
Can I Reopen a Closed Super Account?
Once you close a superannuation account, you are unable to re-open that specific account. You can open up a new account with the same superannuation provider, but you will have a different account number.
What Else Do I Need to Know?
There are many considerations that need to be made prior to transferring your superannuation to another fund. Obtaining professional advice around when to make the transfer, how to make it and where to transfer it can ensure the transfer is completed correctly, for the right reasons and to a fund that suits your needs. It can also avoid you making costly errors.
Our financial planning firm, Toro Wealth, specialises solely in helping 50 to 70 year-olds optimise their financial position in the lead up to retirement. If you’re interested in learning more about our service and cost, click here.
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