Superannuation plays a crucial role in the financial future of Australian workers. As an employer, selecting the right super fund is more than just a compliance obligation—it directly impacts your team’s retirement savings and overall financial wellbeing. With so many options available, understanding your responsibilities and the key selection criteria can make all the difference.
In this guide, we’ll walk through everything you need to know about default super funds, employee choice, and what to look for when choosing the right fund for your business.
What is a Default Superannuation Fund?
A default super fund is a fund that an employer nominates to pay contributions into when a new employee doesn’t choose their fund. This ensures contributions are made in line with the Superannuation Guarantee requirements.
But not just any fund will do. Employers must select a fund that offers a MySuper product—a simple, low-cost option designed to suit the needs of most workers. The MySuper requirement ensures transparency, standardised features, and basic insurance for members.
Respecting Employee Choice
While you’re required to have a default fund in place, employees also have the legal right to choose their superannuation fund. Here’s how that works:
- New employees should be given a Superannuation Standard Choice Form within 28 days of starting.
- If they complete and return the form with their nominated fund details, you must make super payments to that fund.
- If they don’t nominate a fund, then you must pay into your default fund.
Failing to offer employee choice or making late payments can result in penalties and compliance breaches. Always keep records of employee fund selections and ensure your payroll system is set up to manage multiple fund contributions.
Key Criteria for Choosing a Default Fund
Choosing the right default super fund involves more than just picking a well-known name. Here are the most important factors to consider:
1. MySuper Authorisation
Only MySuper-authorised products can be used as default funds. You can check a fund’s MySuper status via the Australian Prudential Regulation Authority (APRA) or the ATO website.
2. Investment Performance and Fees
- Review the fund’s long-term investment returns—how has it performed over the last 5 to 10 years?
- Compare fees, including administration, investment, and insurance charges.
- Use tools like the YourSuper comparison tool from the ATO to benchmark funds.
3. Insurance Options
Many super funds provide default insurance (life, total and permanent disability, and income protection). Evaluate:
- What insurance is included?
- Are premiums affordable for employees?
- Can employees tailor their cover if needed?
4. Ease of Administration
Look for a fund that integrates easily with your payroll and HR software, making contributions and reporting straightforward. Some funds offer employer portals with real-time reporting and STP compatibility.
5. Support and Education
Funds that provide educational resources, onboarding support, and responsive customer service are a bonus. These services help both employers and employees better understand their superannuation.
The Role of HR and Payroll Systems
Managing superannuation can be complex, especially when employees have different fund preferences. A robust HR and payroll system like RomeoHR simplifies the process by:
- Automating super contributions for each employee.
- Ensuring compliance with Single Touch Payroll (STP) reporting.
- Flagging any missing employee super details.
- Keeping records in one secure, accessible place.
Choosing a fund that integrates well with your tech stack will save time, reduce errors, and keep you compliant.
Common Mistakes to Avoid
When it comes to superannuation, these slip-ups can be costly:
- Not offering employee choice or delaying the process.
- Selecting an underperforming fund without checking current data.
- Failing to update default funds if they lose MySuper status.
- Overlooking insurance costs that may eat into employee balances.
- Relying on outdated admin processes instead of using modern payroll tools.
Final Thoughts: Choose Wisely, Stay Compliant
Choosing the right superannuation fund is both a legal requirement and an opportunity to support your employees' financial futures. Whether you're updating your default fund or reviewing your compliance process, it’s important to:
- Offer employee choice.
- Choose a high-performing, low-fee MySuper fund.
- Use tools and software to streamline super administration.
