In this guide
Employers are required to make regular Superannuation Guarantee (SG) contributions for their eligible employees into a complying super fund.
When you take on a new staff member, you generally need to offer them the opportunity to choose the fund you pay into.
If they don’t make a choice but they have a stapled super fund provided to you by the Australian Taxation Office (ATO), that’s where you must make contributions.
If the employee doesn’t choose a super fund and has no stapled fund, your chosen default super fund steps in.
What is a default fund?
As an employer, you need to choose a super fund to accept the contributions you owe your staff that you can’t pay to their chosen fund or stapled fund.
You select your default when your business employs someone for the first time and you can choose a new default if you’re not happy with your current arrangements.
If you’re changing your arrangements, you must provide employees using your current default fund with a superannuation standard choice form. This gives them the opportunity to stay with your old provider or choose a new alternative if they don’t want to join the new default you’ve selected.
You should make contributions to your default fund when:
- The employee started work before 1 November 2021 and has not chosen a super fund
- The employee started work on or after 1 November 2021, has not chosen a super fund, and doesn’t have a stapled fund
- Contributions to your employee’s chosen super fund or stapled fund have been returned to you and the employee can’t provide new/corrected super fund details before the deadline for your SG contribution
Staff may also choose to have their contributions paid to your default fund during the onboarding process, particularly if you’ve selected a fund with attractive features.
Which super funds are acceptable as default funds?
The default fund you select must be a complying super fund and be registered by the Australian Prudential Regulation Authority (APRA) to offer a MySuper product.
A complying super fund fulfils all the requirements of superannuation laws and regulations. To confirm a super fund is compliant, you can request a compliance letter from them or find the compliance letter on their website.
MySuper is a simple low-cost superannuation solution designed to be easy to compare. MySuper products are restricted to charging a limited set of fees, must provide at least a basic level of insurance for death and permanent disability, and have a single diversified investment option or a lifecycle investment option that changes asset allocation as members age.
Almost all super funds available to the public have a MySuper product. The MySuper option acts as a default investment strategy for people that don’t make an active choice when they join. The fund will provide a range of other investment options to choose from, and members can switch at any time.
How to choose a default fund
Selecting a default fund for your employees is an important decision for both your business and your employees.
Super contributions are your employees’ money, and you should choose a fund where that money can grow strongly for their retirement.
It’s also important to think about how the super fund will interact with your business. You want a fund that makes it easy to administer your super contributions and that is responsive when you have a problem or enquiry.
Investment performance and fees
Choosing a fund with strong performance history and low fees should leave your employees better off.
The ATO’s YourSuper comparison tool provides a simple way to compare fees and performance for all MySuper products. It’s useful when you’re selecting a default fund because MySuper is where your staff’s savings will be placed when they don’t make an active choice. It shows the 10-year net return (after investment fees) and the annual fee for a balance of $50,000.
When the 10-year return is displayed as a range (such as 6% – 8%), the fund’s MySuper option is a lifecycle option with a dynamic investment strategy that changes as members age. The range of returns reflects the different performance for each life stage. Younger members will be exposed to an investment strategy with a higher proportion of growth assets such as shares and property that is likely to have higher returns while older members’ savings are invested more conservatively.
Funds that display an individual 10-year return (rather than a range) have chosen to provide a single strategy MySuper option such as a balanced or growth fund.
The tool allows you select up to four funds you’re interested in to form a shortlist and display a more detailed fund comparison including returns over three and five years.
Insurance
After deciding on your shortlist, you can dive deeper to check the level and type of insurance cover each fund provides automatically to their new members, and what it costs. This information is available in the Product Disclosure Statement (PDS) located on the funds’ websites.
All funds with a MySuper option will provide death and total and permanent disability (TPD) cover, and some may also include income protection.
A higher level of automatic cover gives your staff additional valuable protection, but this should be balanced with costs.
Your staff will generally be able to apply for additional insurance if they choose.
Range of investment options
A wide range of investment options gives your employees more opportunity to tailor their super account to their needs. Check the investment guides for the super funds you’re interested in using as a default to see what they offer.
Extra services
Have a browse on the websites of the funds you’ve shortlisted to see how well they serve their members with additional offerings like financial advice (including digital tools), member seminars, local representatives, and calculators.
Take care with paid incentives
It’s illegal for a super fund to give you any benefits as an incentive to select their fund as your default. These incentives can take any form, including corporate hospitality, tickets to sporting events, free or discounted holidays, or discounted rates on products or services.
The Australian Securities Investments Commission (ASIC) takes a dim view of offering goods or services to influence an employer to nominate a default fund or to encourage an employer to remain with a fund.
It’s not illegal for a super fund to give benefits to your employees – such as financial literacy seminars or preferential death benefits – as an incentive to choose the fund.
If you think you’ve been offered unlawful incentives by a super fund you should report it to ASIC.
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