Superannuation: A hard choice for small business owners

SMALL business operators have to wear many hats, and while Aussie workers often grapple to understand superannuation, business owners face the responsibility of selecting a default fund for their employees' compulsory super contributions.

Most workers are free to choose their super fund, but many go with the fund their employer nominates.

This may be an easy option for employees, but it places a burden on employers. Most business owners want to do the right thing by their staff.

With hundreds of funds to pick from, it's important to know the must-have features that will benefit employees. Any fund selected needs to offer a low cost MySuper product.

Bosses should also check also to see if their employees are covered by an industrial award. Some funds focus on workers covered by certain awards.

Having narrowed down the choice, bosses should take a close look at the fees. High fees can consume a huge chunk of employees' savings.

The investment option best suited to staff should also be considered. The majority have their super in a "balanced" fund with exposure across a broad range of investments. However, if the team is mainly older workers a more conservative investment option could be more suitable. A younger workforce may benefit from a more aggressive "high growth" style of fund.

Another factor is the insurance offered by the fund. In particular it's worth checking how well casual or part-time workers are covered.

Above all, an informed decision is required. Our investment regulator, ASIC, recently warned employees against choosing a fund based on incentives.

These incentives can cover anything from tickets to sporting events to discounts on products or services. Super funds are banned from offering these freebies, and choosing a fund on the basis of an incentive could land a boss in hot water.

Check the part of the MoneySmart website on Super for Employers.

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