Time to read : 3 Minutes
Members who failed to move from super funds that failed a government performance test lost $1.6 billion in just 12 months, new analysis shows.
Research from Industry Super Australia (ISA) shows there were around one million members in funds that failed the inaugural 2021 Your Future, Your Super performance test.
Of that million, just 10 per cent switched to a better performing super fund. That is despite all being informed in writing of their fund’s failure and being encouraged to move.
What you need to know
Collectively, the approximately 850,000 members who remained with their poor-performing fund lost a total of $1.6 billion over the past year. This equates to around $1900 per person.
It’s a timely reminder that simply doing nothing with your super can end up costing you tens of thousands of dollars by the time you retire.
ISA chief executive Bernie Dean says the losses could grow even further, as the previous government’s super stapling reforms now tie members to dud funds unless they proactively move out of them.
“This is a reminder that there is huge cost to doing nothing if you are in a dud super fund,” he says. “Lots of people don’t know you can be stapled to a super fund that has failed the government’s performance test, and that could punch a huge hole in a person’s nest egg.”
Let's give you an example of that...
To highlight the point, Bernie says if a member on the median wage, with a balance of $50,000, stayed with one of the poor performers for the next 10 years he/she could be about $25,000 worse off.
If a 30-year-old was stapled to a dud fund for the rest of their working life, they could be $225,000 worse off at retirement.
“Switching out of a dud fund and into a good one is easy, but plenty of people don’t think about it until it’s too late. It’s up to the government to tighten consumer protections, so people are only stapled to the best funds that have passed the performance tests.”
Why does it matter?
The super performance test was introduced to provide members with an independent assessment of how their fund has performed over the year, so they can make any necessary changes.
🙈 But if, as it seems, most customers are ignoring this advice, it’s hard to see how the performance test will ultimately achieve its goal of making Australians more aware of their super.
✋ It’s a point not lost on Australia’s $3.3 trillion super industry, which tasked the new Labor government with conducting an inquiry into the performance test.
🎙️ But Paul Schroder, the head of AustralianSuper, the country’s biggest super fund, told an Australian Securities and Investments Commission (ASIC) conference that struggling funds pushing for changes to the performance test should leave the industry rather than complaining about the test.
👍 “Should we, as funds, make more money than a passive benchmark? Of course,” he said. “Should we make more money than the median? Of course. If we can’t keep doing that, we should stop and give the money to someone else.”
The bottom line
Your super really is your future so it matters how it is doing.
It's a good idea to:
Do your due diligence and check that your super isn't on the failed list.
Pay attention to your super and balance to make sure it is performing as you expect it to.
Always look out for any extra fees you are being charged as they can seriously add up.
This article is republished with permission from Your Life Choices. Read the original article.
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
