How to choose the right super fund for you

You want to be a member of a superannuation fund that will make you as wealthy as possible by the time you retire without exposing you to too much unnecessary risk along the way.

To do this, your superannuation fund has to earn consistently reasonable rates of investment return, year in and year out. To give the fund a better chance of building your retirement savings, it helps if it is charging reasonable fees. The higher the fees, the less money you have in your pocket.

As well, you need to look at the funds' insurance - what it costs, the level of cover and exclusions. There can be big differences between funds. Most offer life insurance (also known as death cover), total and permanent disability (TPD) and income protection.

All funds offer a range of investment choices and many have financial advice services.

While it is not always possible to pick the top fund, you need to be vigilant and monitor your superannuation fund against the rest of the pack.

For the past 16 years, most superannuation fund members have been able to choose their own superannuation fund - unless you are in a small number of public sector or enterprise agreement corporate funds. This means you don't have to go with your employer's super fund.

Instead you can shop around to see how your fund compares to others. If your fund compares poorly you can register your dissatisfaction by moving your superannuation savings to another fund.

Comparing super funds can be complicated but it has been made a little easier with the launch last week of a new performance test for 80 MySuper funds managing $900 billion by the regulator, the Australian Prudential Regulatory Authority (APRA).

As superannuation is a long-term savings vehicle, it is important to focus on fund returns over a number of years. The APRA performance test looks at how superannuation funds have performed over the past seven years.

What makes a superannuation fund perform well?

The top-performing funds have made some smart investment decisions, timing their move into certain under-priced asset classes and taking profits at or near the top.

How do they do this? Superannuation funds have extensive dedicated investment experts in the form of asset consultants, investment committees and even internal in-house investment capabilities. Compared to self-managed superannuation funds, where the trustee typically makes all the investment decisions themselves, members of funds can take comfort that the big superannuation funds have layers of highly qualified experts who are experienced, working at investing full time.

Asset consultants assess and rate investment managers both here and overseas, give a view on asset allocation, currency, investment cycles and when to sell down or buy into an asset.

It is a good time to check on your superannuation fund with the APRA performance table to see if your fund is among the top funds. It can be found at ato.gov.au/yoursuper-comparison-tool.

Or more importantly, are you a member of one of the 13 funds managing $56 billion that have had a poor seven-year performance history? Poorly performing superannuation funds can cost you dearly and there are 1.1 million super fund members in 13 MySuper superannuation funds that failed the government's performance test. See below.

As well as APRA's performance table, there are some commercial superannuation fund comparison websites that provide information on a wide range of super funds. They include SelectingSuper, SuperRatings, ChantWest, Morningstar and RateCity.

All offer some information on a range of fund fees for free and some charge a fee for more detailed analysis. Be aware that they have different methodology when comparing funds.

Here are the top superannuation funds, ranked by APRA for a seven-year return per annum for a 30-year-old with a balance of $50,000:

1. Active Super
2. AustralianSuper
3. Hostplus
4. AON Master Trust
5. Goldman Sachs and JB Were Super Fund
6. UniSuper
7. Cbus
8. Mine Super
9. QSuper
10. Retirement Wrap
11. StateWide Super
12. Sunsuper
13. Retirement Portfolio Service

And here are the funds that failed APRA's recent performance test.

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