When you start your first proper job, one of the many forms you’ll need to fill out asks you to nominate a superannuation fund. If you’re like most teenagers facing this question for the first time, you might be tempted to just tick whatever box looks easiest or accept whatever your employer suggests. But spending a little bit of time choosing the right fund now could genuinely make a difference of tens of thousands of dollars by the time you retire.
This guide will walk you through what you actually need to know to make a sensible choice, without getting bogged down in financial jargon or overwhelming complexity.
What is superannuation, anyway?
Superannuation (often referred to as “super”) is basically a long-term savings account for your retirement. Every time you get paid, your employer is legally required to put an additional percentage of your wage into this account on top of what you actually receive. Currently, that’s 12% of your ordinary earnings.
The benefit is that this money grows over time through investment returns and compounds over decades, potentially turning into a substantial amount by the time you finish working. The catch is that you generally can’t access this money until you retire (unless you meet certain special circumstances).
While retirement probably feels impossibly far away right now, starting with the right fund matters because even small differences in fees or investment returns compound dramatically over 40 or 50 years.
What to look for when choosing a fund
Not all super funds are created equal, and the differences between them can have a real impact on your eventual retirement savings.
Fees
Super funds charge various fees to manage your money, and these can vary significantly between providers. The main ones you’ll encounter are administration fees (usually a flat annual fee plus a percentage of your balance) and investment fees (the cost of actually investing your money).
When you’re young and your balance is small, a high percentage-based fee might not seem like much in dollar terms. But remember, you’re likely to have this account for decades, and those fees compound over time. Even a difference of 0.5% in annual fees can cost you tens of thousands of dollars over a working lifetime.
The YourSuper comparison tool from the ATO is incredibly useful here – it shows you fees and performance for different funds side by side.
Investment performance
Your super is invested in various assets like shares, property, and bonds. Different funds have different investment strategies and track records, and their performance can vary quite a bit.
Look at long-term performance (at least 5-10 years) rather than just the last year or two, as investment returns naturally fluctuate. Most funds offer different investment options ranging from conservative (lower risk, lower expected returns) to growth (higher risk, higher expected returns).
When you’re young, you have decades for your super to recover from any market downturns, so most financial advisers suggest younger people can afford to take more risk with growth-focused options. But ultimately, you are free to choose whatever option you feel most comfortable with.
Insurance
Many super funds automatically include basic life insurance and total and permanent disability (TPD) cover. This can be valuable protection, but it also costs money through insurance premiums deducted from your super balance.
If you’re young and healthy with no dependents, you might not need this insurance yet, and the premiums could be better spent growing your super balance. However, if you have people who depend on your income or you’re in a high-risk occupation, keeping the insurance might make sense. You can usually opt out if you don’t want it.
Investment options and values
Some people care about where their super is invested. If you’re concerned about environmental, social, or ethical issues, you might want a fund that offers sustainable or ethical investment options. These funds typically avoid investments in things like fossil fuels, tobacco, or weapons manufacturing, and instead focus on companies with strong environmental or social practices.
Other people are less concerned about this and primarily focus on returns and fees. Neither approach is wrong – it just depends on what matters to you.
Industry funds vs. retail funds
You’ll often hear about “industry funds” and “retail funds,” and it’s worth understanding the difference.
Industry funds were originally set up to serve people working in specific industries (like healthcare, education, or hospitality). They’re run on a not-for-profit basis, meaning any profits go back into the fund rather than to shareholders, and they often have lower fees as a result. Common examples include Australian Super, Hostplus, and Rest.
Retail funds are run by banks or financial institutions as for-profit businesses. They sometimes offer more bells and whistles like additional investment options or financial planning services, but they also tend to have higher fees.
Research consistently shows that, on average, industry funds tend to outperform retail funds after fees are taken into account. That said, some retail funds do perform well, so it’s worth comparing specific funds rather than just choosing based on category.
Your employer’s preferred fund
Some employers have a default or preferred super fund, and occasionally there are financial benefits to using it.
In certain sectors, particularly universities and some government roles, employers might contribute additional amounts if you use their specified fund. For example, if you work in the higher education sector, using UniSuper often means your employer contributes more than the standard 12%. This is worth checking, because these extra contributions can be substantial over time.
However, for most casual and part-time jobs that teenagers typically have, there won’t be any extra benefits to using the employer’s default fund. You have the legal right to choose your own fund, and your employer must respect that choice.
Student-focused super funds
A few super funds specifically market themselves to students and young people, offering features like low minimum balances, no fees on small accounts, or educational resources. Some examples include:
- Student Super
- UniSuper (particularly relevant if you work in education)
- Australian Ethical (focuses on ethical and sustainable investments)
These can be good options to consider, but don’t just choose one because it’s marketed to students. Make sure you’re still comparing fees, performance, and features against other funds. Sometimes a mainstream industry fund might actually be a better choice even for younger people.
Your industry might also have a specific fund that’s particularly suitable – for instance, if you’re working in hospitality, Hostplus is often recommended, or if you’re in healthcare, HESTA might be worth considering.
How to actually compare and choose
So with all that information, here’s a practical approach to making your choice:
Ask your employer
Start by checking if your employer offers any additional contributions for using a specific fund. If they do, and that fund has reasonable fees and performance, it might be worth seriously considering. If there are no extra benefits, you’re free to shop around.
Use a comparison tool
Use the YourSuper comparison tool to compare fees and performance across different funds. This tool is run by the government and gives you objective data.
Do some reading
Read through the Product Disclosure Statement (PDS) for any fund you’re seriously considering. Yes, it’s boring, but it tells you exactly what fees you’ll pay and what you’re getting. Pay particular attention to the fees section and the investment options available.
If ethical investing matters to you, look into the fund’s investment approach and what they do and don’t invest in.
Don’t forget insurance
Check what insurance comes with the fund and whether you actually want it. If you don’t need it, make sure you can opt out to avoid paying unnecessary premiums.
Choose what’s right for you
Once you’ve done this comparison, pick a fund that has low fees, solid long-term performance, and aligns with your values (if that’s important to you). There’s no single “best” fund for everyone, but there are definitely some poor choices you can avoid by doing a bit of research.
Making it official
Once you’ve chosen a fund, you’ll need to provide your employer with your super fund details. This includes the fund name, your member number (if you already have an account), and the Australian Business Number (ABN) of the fund. If you’re setting up a new account, the fund will walk you through the process and provide these details.
Keep your fund details somewhere safe – you’ll need them for every job you have. Also, try to stick with one fund rather than accumulating multiple accounts across different jobs. Having multiple super accounts means paying multiple sets of fees, which erodes your balance unnecessarily. If you do end up with multiple accounts, you can consolidate them through the ATO’s online services.
The choice you make now isn’t permanent (you can switch funds later if you find a better option) but starting with a decent fund means you’re not wasting years of growth on unnecessary fees or poor performance. Twenty minutes of research now is genuinely one of the best investments of time you can make for your future financial wellbeing.
Find out more
For more detailed information about how superannuation works and choosing your first fund, MoneySmart (run by the Australian government) has comprehensive guides. Canstar also offers useful comparisons and information specifically for young people.
We also have more helpful information on money matters on our website here.
