Australian Superannuation Funds Under performing

By: ce | 29 May 2017


Many Aussies take a “set and forget” approach to superannuation. They accept their business’s default fund and trust their employer’s contributions and any extra money they add will set them up for their golden years. However, new research shows many Australian superannuation funds are under performing.

The bank-owned superannuation fund industry has performed so badly that investing in term deposits over the last decade would have yielded a better result, according to new research from Industry Super Australia. This is staggering considering these superannuation funds include a variety of growth assets such as shares, property and private equity.

Retail superannuation funds also struggled in the last 10 years. They averaged a return of just 3.3 percent each year, almost 2 percentage points less annually than not-for-profit industry funds.

That might seem like a small difference, but when you crunch the numbers you’ll realise how large the gap truly is. Imagine you had $50,000 in superannuation at the start of the period studied and made no additional contributions. In a retail superannuation fund, you’d have $69,170 by the end of the 10 years. If you’d invested that same amount in an industry super fund, you’d have $82,220.

Taken on a larger scale, industry funds returned a combined total of $42.91 billion more than the super industry median to their members. In comparison, retail funds cost their members $25.42 billion by performing well below the industry median.

According to Matt Linden, the public affairs director for Industry Super Australia, the solution is simple: Australians need to become switched on to superannuation.

“Lots of people are disengaged with super and are not financially literate,” he told The New Daily. “Maybe the bank-owned funds are exploiting this disengagement for their benefit.”

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