Choosing your first super fund at 18

When you start your first job, your employer asks which super fund to pay your Superannuation Guarantee into. You have three options: pick a fund, do nothing (and let the ATO "staple" you to your existing fund or the employer default), or hand them a Standard Choice form with your chosen fund's details.

This guide walks through how to pick a fund without spending three weekends on it.

The 80/20 rule for a first fund

A typical first-job balance grows from $0 to maybe$5,000 over two or three years. Two things make the biggest difference at that size:

• Fees, especially fixed weekly admin fees.
• Insurance, which is sometimes switched on by default and quietly drains a small balance.

Investment performance also matters, but on a $1,000 balance the difference between a 7$20 a year. The difference between a fund charging $1.50/week admin and one charging$0.50/week is $52 a year, which is bigger.

Step 1: Use the MySuper filter

By law, any default super product must be a "MySuper" product. MySuper products have capped fees and a single diversified investment strategy. They are the simple-mode default.

The ATO's free YourSuper comparison tool lists every MySuper product with:

• Total annual fees on a $50,000 balance (a fair benchmark).
• Five-year and ten-year net returns.
• Whether APRA has flagged the product as underperforming. Avoid any product flagged "underperforming".

For most school leavers, picking a non-underperforming MySuper product with fees under $500/year on a$50,000 balance is enough due diligence.

Step 2: Industry vs retail vs public-sector

You will see three types of fund:

• Industry funds (e.g. AustralianSuper, Australian Retirement Trust, Hostplus, CareSuper). Set up by unions and industry bodies originally; profit-for-member structure. Generally cheap.
• Retail funds (e.g. AMP, BT, Mercer). Run for profit by banks or asset managers. Historically more expensive, but the gap has narrowed.
• Public-sector funds (e.g. UniSuper, Aware Super, ESSSuper). Originally for specific sectors; many are now open to everyone.

ASIC's Moneysmart points out that fund type matters less than fees and investment option. A cheap retail fund can beat an expensive industry fund.

Step 3: Pick an investment option

Inside the fund, your money is invested across asset classes. Most under-25s sit in the default MySuper option, which usually has 70 to 80% in growth assets (shares, property). That is appropriate for a 40-plus year time horizon.

Some funds offer a "high growth" option with 85 to 95% in growth assets. Over the long run, high growth has historically outperformed balanced for those who can ride out the volatility. Make this an active choice, not a default.

Step 4: Turn off insurance you do not need

By law, super funds cannot default a new member under 25 with a balance under $6,000 into insurance. But once your balance crosses$6,000 or you turn 25, default life and total-and-permanent disability (TPD) cover can switch on. Premiums come straight out of your balance.

If you have no dependants and own no assets, default insurance is rarely worth the premium. Log in and opt out. If your circumstances change later (a partner, a mortgage), opt back in.

Step 5: Give the fund your TFN

Without your TFN, the fund cannot accept personal contributions and pays a higher tax on employer contributions. Provide it when you join.

What to do today

• Open YourSuper.
• Pick a MySuper product that is not flagged underperforming and charges under $500/year on a$50,000 balance.
• Note the fund's USI (Unique Superannuation Identifier) and your member number.
• Give them to your employer on the Standard Choice form.
• Log in to the fund's app and turn off any default insurance you do not need.

That is it. Revisit once a year.

This is general explanatory information. For advice on choosing a fund or option for your circumstances, see a licensed financial adviser.