Thank you for the question Len.
While I cannot give you a specific answer about what is right for your particular situation, I can go through the factors to consider that may impact the final balance of your superannuation benefits in retirement before making a decision to make a change.
There are many benefits to consolidating your superannuation, some of which you mentioned including:
- Ensuring you have one set of fees coming out of one account
- Having one investment strategy that should align with your risk appetite
- Insurances not eating away at your retirement benefits if you are not actively contributing to one fund
- Benefit from adding regular contributions to one account for long term growth while the market recovers
When initiating a contribution, investment switch or withdrawal, you’re effectively buying and/or selling investment units/holdings which is similar to how you’d purchase and sell shares in a company.
You should check with your fund provider of what these costs are before making a change to your investment as this will ultimately reduce the overall amount you transfer over.
If you have Life insurances on your superannuation account that you are considering closing, this will be lost and cannot be reactivated if you change your mind.
If you have underlying health issues or difficulty getting insurance elsewhere, you should factor this into your decision.
Switching Investment Options
If you are thinking of staying with your current fund and switching the investment strategy from ‘High growth to balanced’, this will still result in selling down your current investment holdings and reducing your allocation to growth assets and therefore your anticipated returns- which at a time when the market is low, may result in your portfolio not recovering to where it was pre-covid.
Selling your investments while the market has not fully recovered is like ‘buying shares high and then selling low’. You have to look at your own timeframe for investing eg, 5 years, 10 years +.
If you do not require the funds in the short to medium term, you have time on your side which history shows allows the market to recover as we can see from the GFC in 2008/2009 and the attack on the World Trade Centre in 2001.
Another option you may want to consider is changing your future contribution strategy only which will no sell down any of your current holdings and will only change where your future contributions go.
Super funds have a number of underlying fees such as administration fees, investment management fees, indirect costs and other charges.
You should consider the fees on each fund before consolidating, as this could mean the difference of tens of thousands of dollars in retirement.
Transferring your super to another provider may lock in any losses/ gains and unfavourable tax components within your retirement savings. There are ways to minimise the impact of this as you get closer to retirement, however you should speak to a licensed representative about what is best for your particular situation.
Another point to consider is that while the market is still low and you are making regular contribution to your fund, you will be increasing the amount of units you purchase and as these grow in value, so will the overall superannuation balance which will benefit from the time in the market.
You should consider speaking with a licensed Financial Adviser about what is best for your situation if you are unsure of where to go from here as getting it wrong now may be harmful to your retirement.