How to Find the Best Super Fund for Low-Income Earners
Written by Bindi Gethen
In Australia, superannuation, often called ‘super’, is like a savings account for when you retire. It’s one of the best ways to plan your retirement. You might think that super doesn’t matter as much because you earn less.
On the contrary, if you carefully plan your low-income super contribution, you can rip the benefits after retirement. It’s like planting a tree – the sooner you start, the more fruits it bears. Secondly, there are plenty of options for you to start investing in your future.
But low-income earners need to think about one more thing – choosing the right super fund. It can mean the difference between just getting by or having a comfortable retirement. Choosing the right super helps these seeds grow stronger and healthier.
Let’s learn how to find the best super fund for low-income earners.
Tips for Finding the Best Super Fund for Low-Income Earners in Australia
Although the choices are plenty, not all super funds are made equal. Choosing the fund that best meets your low-income super contribution needs is easier said than done. You will need to think about the following factors:
1. Performance
When searching for the best super fund, check its performance over at least five years. Super funds are linked to market fluctuations. Looking at the five years of track record helps you see how the fund manages the ups and downs of the market.
Pro tip
Usually, a fund that consistently performs well is a safe bet. It means the super is managed wisely and can handle changing market conditions. This is critical because you want your low-income super contributions to grow steadily over time.
2. Low Fees
Fees are another crucial factor to consider, especially for low-income earners. On average, in a super fund’s default investment option, you may have to pay between 0.91% and 1.21% of the account balance in fees per year.
High fees can reduce your retirement savings over time. Look for super funds with low fees. That means more of your super contributions will stay invested and grow steadily over time.
However, don’t trade low fees for performance. Find a balance between good performance and low fees. The cheapest options aren’t necessarily the best, especially if your contributions fail to grow efficiently.
3. Investment Performance
You may have heard the term – ‘high risks high rewards.’ But this isn’t a good strategy for long-term investments like your super. In this case, stability and consistency are more valuable than short-term, high-risk gains.
Pro tip
The best super fund for low-income earners is the one that provides stable returns over time. That means your fund is more capable of managing the ups and downs of the market. This strategy reduces the risk of heavy losses when the market takes a nosedive. It protects your retirement savings from getting wiped out, which most low-income earners can’t recover from.
4. Insurance
Insurance is necessary to protect your family. Many super funds offer three types of insurance covers – life (also called death cover), Total and Permanent Disability (TPD), and income protection.
Buying insurance through super can sometimes be cheaper than purchasing it directly. It can be an added advantage for low-income earners. However, check the coverage details to ensure it meets your needs, including premium rates, coverage, and exclusions.
5. Investment Options
Supers come in all shapes and sizes. The most common super fund investment options include growth, balanced, conservative, and MySuper products. Each option comes with its unique features and risks.
For example, the growth option offers higher potential returns as it actively invests in shares and property. That means it also carries more investment risks.
On the other hand, conservative options offer lower potential returns but also have low risk. As the name suggests, balanced super funds try to get you the best of both worlds – growth and conservative options. MySuper is one such option.
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Research and Compare Super Funds for Low-Income Earners
When choosing a super fund for low earners, compare like with like. In short, compare a balanced super fund with another balanced super fund. Also, select the same time frame for their comparison. That will provide you with more accurate outcomes.
You can compare supers in three ways:
1. ATO's YourSuper Comparison Tool
The Australian Taxation Office (ATO) offers a valuable resource called YourSuper Comparison Tool. Log into your ATO account to compare their performance, fees, and returns. The only drawback is this tool tracks and compares only MySuper products.
2. The Product Disclosure Statement (PDS)
Think of a Product Disclosure Statement as the blueprint of a super fund. Read it whenever you invest in a super, regardless of whether it’s a good super fund for low-income earners.
The PDS will tell you about the fund’s investment strategy, objectives, and how it performed over the years. It also outlines the fees and any other costs associated with the fund. This helps you understand what you’re signing up for.
3. Super Comparison Websites
Your third option is super comparison websites. Canstar is one of the best super comparison websites. It attracts over 2 million Australians each year. It offers a detailed comparison of different super funds based on factors such as performance, fees, services, and investment options. They also have a mobile app.
Other notable options include Chant West and Morningstar. Like Canstar, these websites also offer a well-rounded view of each fund. This information can help you choose the best super fund for low-income earners.
Boost Your Low-Income Super Contribution
The Australian government runs many schemes to help low-income earners boost their retirement savings. Here are two of them to help you plan your retirement more effectively.
1. Government or Super Co-Contribution
This is a fantastic way for low-income earners to boost their super savings. You are eligible for super co-contribution if you earn less than $43,445 in the 2023-24 financial year. If you make a personal (after-tax) contribution, the government will contribute 50c for every $1 you contribute up to a maximum of $500. However, the maximum threshold is $58,445. You can’t receive a co-contribution if you earn more than $58,445.
2. Low Income Super Tax Offset (LISTO)
When you’re on a low income, every cent counts. The Low Income Super Tax Offset (LISTO) helps offset the tax paid on your concessional low-income super contributions.
According to ATO, if you earn up to $37,000 a year, you may be eligible to receive a low-income super tax offset (LISTO) payment of up to $500. You don’t have to worry about any paperwork. However, be sure your super fund has your tax file number (TFN). ATO will automatically calculate your LISTO and pay it into your super account.
This means more of your money stays in your super fund rather than going to tax. Taking advantage of these co-contributions can make a significant difference in the long run, especially if you start planning your retirement early.
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Frequently Asked Questions
A superannuation fund, or super, is a financial planning program that helps every eligible Aussie save for their retirement. Think of it as a special savings account where you can set money aside for when you retire.
Low-income earners should select superannuation funds with low fees because high fees can significantly reduce your overall retirement savings. Although these fees may seem small, they can add up over time.
In Australia, the government makes co-contributions if you are eligible. For example, low-income earners can get up to a maximum of $500 (co-contributions) and a tax offset (LISTO) for up to $500. The eligibility and income threshold may change for each scheme. But, all government co-contributions aim to increase your retirement savings.
When comparing super funds for low earners, look at their fees, performance history, insurance options, and investment choices. But more importantly, compare like with like. For instance, compare a MySuper with another MySuper for the same period.
Yes, low-income earners can benefit from insurance options in super funds. It’s a great way to safeguard your family’s future. Insurance can protect you in case of unexpected events like disability, death, or loss of income.
Let The Bookkeeping Studio Help You Plan Your Retirement
Even low-income earners can plan their retirement. You will need to start early and choose the right super fund to grow your retirement savings steadily. And it all starts with balancing your books. Knowing how much you make, spend, and invest will help you plan your future more effectively. That’s where we come in.
Whether you are a sole trader or a casual worker, our bookkeeping services can help you plan your finances. Let us help put your financial ducks in a row.
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