Do you like the idea of running your own super fund, but can't be bothered?
More and more super funds are adding 'direct investment' options that allow fund members to tailor their super to their own requirements.
They are doing do so to retain fund members with higher account balances who might be thinking of starting a self-managed super fund.
Funds are allowing members to directly invest in Australian shares, exchanged traded funds, term deposits and managed funds. Kirby Rappell, the head of research at SuperRatings, said about 21 per cent of not-for-profit super funds offer direct investments as an option, as do about 42 per cent of retail funds.
However, since nearly all of the largest funds offer direct investment, about 40 per cent of super fund members have access.
Of the funds that do not offer direct investment yet, about 60 per cent told SuperRatings they were considering adding it in the future.
However, there is big variation between super funds' offerings.
For example, while all funds with a direct investment option offer term deposits, 76 per cent offer exchange traded funds (ETFs) and 68 per cent offer investment in the shares of the largest 300 Australian-listed companies.
Just under 28 per cent told the SuperRatings' survey they offer Australian-listed investment companies (LICs) and 28 per cent offer unlisted managed funds.
Most people have their retirement savings with their funds' main investment option, which will be a balanced option that spreads the money between the main asset classes such as shares, property, fixed interest and cash.
The funds have limits on how much can be put into a single investment – usually 25 per cent of their account balance.
They do this to stop members from taking silly risks by putting all of their retirement savings into a single share, or a handful of shares.
There is usually also a minimum balance needed in the super account before being able to make direct investments, although 17 per cent of funds have no minimum.
As the super funds bring scale to investing directly, often the costs of making the investments, such as the brokerage on buying and selling shares, are lower than if the fund member were to buy the same shares outside of super.
While direct investment offers more flexibility in how members invest their retirement savings, there are some traps.
For example, about one in four funds offer term deposits from just one provider.
Sometimes that will be the institution, such as a bank, that runs the superannuation fund and it could be a particularly poor interest rate.
Almost 40 per cent have at least four term deposit providers, which increases the chances of getting more competitive interest rates.
Something to watch closely is the fee charged for direct investment. SuperRatings' Rappell said the fees range between $150 and $1200 a year.
Having only a small amount of money invested directly may not be worth it.
