Merging Super Accounts, and the One Reason Not To

01 What duplication actually costs

Each account charges its own administration fee, typically a flat weekly or monthly amount plus a percentage. The flat component is what makes duplication expensive for small balances, because it does not scale down.

Insurance premiums duplicate in the same way and are usually larger. Default death and total permanent disability cover in three accounts costs three premiums, and the benefit payable is not three times as useful — you cannot die three times, though the cover would pay out on each policy.

Income protection is the exception where duplication can be actively harmful. Most policies pay a percentage of income and coordinate with other cover, so holding two often means paying twice for a benefit that will only ever be paid once.

The worked example applies your own fee and premium figures across the years remaining, and the total is usually larger than people guess because it compounds against the balance rather than simply accumulating.

Source: ASIC Moneysmart — Superannuation fees

02 The insurance check that has to come first

Cover inside a super account ends when the account is closed. That is the entire risk in this decision, and it is not reversible: an insurer that would have covered you at 32 without questions will underwrite you at 47 with them.

Get the cover details from every account before doing anything: the type, the sum insured, the premium, and — most importantly — the definition of disability. An own-occupation definition is materially better than an any-occupation one and is often the reason an older account is worth keeping.

Where the cover matters, arrange the replacement before closing the old account rather than after. A new policy that is applied for and declined leaves you with the option of keeping the original; one applied for after cancellation does not.

The wider question of whether to hold insurance inside super at all is in the insurance in super reference, and it is a different decision from this one.

Source: ASIC Moneysmart — Insurance through super

03 Accounts worth keeping

A defined benefit interest should almost never be rolled out. Its value is a formula based on service and salary rather than an account balance, and rolling it over converts a promise into a lump sum that is frequently worth less.

An account with an unusually favourable insurance definition is the second case, as above. The third is an account holding a large tax-free component, where the proportion matters for what a non-dependant beneficiary would eventually pay.

Employer arrangements are the fourth. Some employers contribute above the statutory rate only into their own fund, and rolling the balance out is fine while nominating a different fund for future contributions is not.

In every other case the argument for keeping a second account is usually sentiment or inattention rather than a reason, and the fees are being paid either way.

Keeping an account for investment diversification is not one of the reasons. Two funds holding similar balanced options give you the same exposure twice with two sets of fees, and where you genuinely want different exposures, most funds let you split a single balance across investment options inside one account.

Source: ATO — Keeping track of your super

04 How the rollover works

The simplest route is through your myGov account linked to the ATO, which lists every account held in your name including any ATO-held super, and allows a transfer to be requested directly. The transfer generally completes within a few days.

The receiving fund can also do it for you, and will, because it is in their interest. That is fine, and it is worth being aware that the party arranging the transfer is not neutral about which fund you end up in.

Rolling over is not a taxable event and does not count against a contribution cap. It does have one timing consequence: a notice of intent to claim a deduction on personal contributions must be lodged before the money leaves the fund, as described in the contribution routes comparison.

Check the balance has arrived and the old account is closed. Partial transfers happen, usually where an insurance premium or a fee is deducted after the transfer is initiated, and an account left open with a small balance keeps charging.

Source: ATO — Keeping track of your super

05 Lost and ATO-held super

Accounts you have forgotten are the most common finding. An account becomes lost where the fund cannot contact you or has not received a contribution for a period, and inactive low-balance accounts are transferred to the ATO under the rules described in the Protecting Your Super reference.

ATO-held super earns interest but is not invested, so a balance sitting there is falling behind a fund's long-run return every year. Claiming it back into an active fund is done through the same myGov screen.

The search is worth doing even if you are confident you have no lost accounts. Employers sometimes open accounts under slightly different name spellings, and those show up in the ATO's records and nowhere else.

Source: ATO — Protecting your super