Will I lose money if I switch super funds? (2024)

I am currently receiving fortnightly payments from my superannuation pension fund and looking to switch to a different provider that’s performing much better. What are the implications in switching over? Do I lose any money by switching over to a new provider? Is there any tax payable?

It’s reasonably unlikely, but if your pension should happen to be a Term Allocated Pension, ignore what I’m about to say and speak to your financial planner.

Switching provider will incur some costs, as there is a difference between the buy and sell price of investments. Some funds might also charge a small admin fee to roll over your fund. In addition, you miss out on a few days of earnings as the transfer occurs. None of these costs are typically considerable and so would be unlikely to dissuade you from making a change if that is what you’ve decided to do.

There is no tax payable in switching pension providers.

Whilst it’s unlikely to be relevant given you are in pension phase, if there is any insurance attached to your account you would want to tread carefully with regards to any move.

Loading

It’s worth noting that comparing funds is difficult. Make sure the investment mix between the two funds is consistent. For example, if your current fund was a 50/50 split of growth and defensive assets, but the new fund you’re looking at has 70 per cent growth, then of course its returns are better, but that is because it is taking on more risk.

Also, be sure to compare long-term results, as sometimes investment strategies take time to bear fruit and a fund might lag for a year or two before their strategy pays off. Even this has its drawbacks though because it is backward-looking. Perhaps the people responsible for those past great returns have retired or moved elsewhere.

Because using returns is a challenging way to compare funds, we often place a higher weighting on the fee comparison. Future returns are unknown, but savings on fees are certain.

The lowest cost provider is not necessarily the best, we all know that we get what we pay for, but if the new fund you are considering has lower fees, and its long-term return is at least what you’ve experienced in the past, a change in pension provider might be appropriate.

I understand that from July 1, the $330,000 non-concessional amount that can be put into super will rise to $360,000. Recently, you suggested a reader could put $110,000 in this financial year, and then $360,000 in after July 1 (covering the following 3 years I assume). That’s $470,000 in 2 years.

If $330,000 was put into super this financial year, what is the maximum non- concessional amount that can be put into super after July 1?

Yes, the non-concessional contribution limit will rise to $120,000 from next financial year. Using the bring forward provisions you can make three years’ worth of contributions in a single year, but are then precluded from making any further contributions for the next two financial years.

If you’ve put $330,000 in this year you have used up your non-concessional cap for this year and the next 2 financial years. Therefore, you could next make this type of contribution in the 2026/27 financial year.

Given the strong growth achieved by super funds so far this financial year I wouldn’t be too disappointed. It’s quite possible you’ve earned $30,000 on your $330,000 contribution if it went in early in the year, and you have a growth allocation in your fund.

Paul Benson is a Certified Financial Planner. Questions to: paul@financialautonomy.com.au.

• Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circ*mstances before making any financial decisions.

Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.