The ATO estimates that Australians hold over $18 billion in lost and unclaimed super across more than 6 million accounts. The standard advice is simple: consolidate everything into one fund and stop paying multiple sets of fees.
That’s usually right. But not always.
Consolidating super makes sense when you’re paying duplicate insurance premiums you don’t need, when administration fees are eating into a small balance, or when you simply can’t keep track of what’s where. For most people, having one well-chosen fund with a clear investment strategy is far better than having three or four accounts accumulating fees on forgotten balances.
But there are situations where rolling everything together can actually cost you.
Insurance you can’t replace
If you have an older super fund with life insurance or income protection cover that was issued without medical underwriting (meaning you were accepted automatically when you started the job), rolling out of that fund cancels that cover. If your health has changed since then, you may not be able to get equivalent cover at the same price, or at all. We’ve seen clients cancel cover worth thousands per year because they consolidated without checking what insurance they held.
Before you consolidate, find out exactly what insurance is attached to each account. If you have a pre-existing condition or a health history that might affect underwriting, that old policy could be worth keeping.
Defined benefit schemes
Some older funds, particularly state government and public sector schemes, are defined benefit funds. These guarantee a retirement income based on your salary and years of service, not on investment returns. Rolling out of a defined benefit fund is almost always irreversible and almost always a bad idea. The guaranteed income stream is typically worth far more than the lump sum they’ll offer you to leave.
Tax implications
If you’re consolidating a taxed fund into an untaxed fund (or vice versa), there can be tax consequences. This is unusual. But it happens, particularly with some government schemes. Get advice before you move.
The right approach
Find all your accounts using myGov. Check the insurance, fees, and investment options in each one. Then make a decision based on your specific situation, not a generic rule.
If you’re not sure where to start, bring your statements to your next meeting. This is exactly the kind of thing a 15-minute review can sort out. The savings can be significant.
