Choosing a super fund for your staff

SMALL business operators have to wear many hats, and while Australian workers often grapple to understand how superannuation works, business owners face the responsibility of selecting a default fund for their employees' compulsory super contributions.

Most workers are free to choose their own super fund, but many simply go with the fund their employer nominates.

This may be an easy option for employees. But it places a solid burden of responsibility on employers. Most business owners want to do the right thing by their staff, and this includes making sure the default fund they choose gives employees a decent chance of growing a healthy nest egg.

With hundreds of funds to pick from, it's important to know the must-have features that will benefit your employees.

First up, any fund you select needs to offer a low cost MySuper product. Check also to see if your employees are covered by an industrial award. Some funds focus on workers covered by certain awards.

Having narrowed down the choice this far, take a close look at the fees each fund charges.   High fees can consume a huge chunk of your employees' long term retirement savings.

Next, consider the investment option best suited to your staff. The vast majority of Australians have their super invested in a 'balanced' style of fund with exposure across a broad range of investments. However if your team is comprised mainly of older workers, a more conservative investment option could be more suitable. Conversely a younger workforce may benefit from a more aggressive 'high growth' style of fund.

Another factor to look at is the cost of insurance offered by the fund. In particular it's worth checking how well your casual or part-time workers are covered.

Above all, make an informed decision. Our investment regulator ASIC recently warned employees against choosing a fund based on incentives from super fund providers. 
These incentives can cover anything from tickets to sporting events through to discounts on products or services. Super funds are banned by law from offering these freebies to employers, and choosing a fund on the basis of an incentive could land you, and the fund, in a lot of hot water.

For more details on how to choose a super fund for your staff, check out the new section of the government's MoneySmart website entitled 'Super for Employers'.

Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.

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