Super comparison tool urgently needed: watchdog

Australians must have online super comparison tool, says watchdog.

Why poor super funds are surviving

The financial services royal commission and the Productivity Commission (PC) have impressed on all Australians how much super could be lost through poorly performing super funds. And while we can head to comparison sites for information about everything from dog shampoo to best dishwashers, consumers are still drawing a blank in terms of an online comparison tool for superannuation.

Chief executive of the Australian Institute of Superannuation Trustees (AIST), Eva Scheerlinck, says anybody who has ever tried to compare the performance of their super fund with another fund knows this is a challenging and, all too often, fruitless exercise.

“Astoundingly, super funds aren’t required to provide simple, comparable information on the fees and returns of choice products, despite these products collectively managing more than $1 trillion of individuals’ savings – nearly double the amount of savings in default funds,” she told Fairfax Media.

She said the challenge was particularly acute for choice super products, where people’s funds end up if they leave their workplace default (MySuper) fund.

“While, as the name suggests, choice products are supposed to be for members who actively choose a super fund, we know that this often isn’t the case,” she said.

“In fact, so-called choice products allow some for-profit super providers to charge higher fees and provide lower returns outside the consumer protections that exist in the default system.

“When the Productivity Commission recently conducted an in-depth review of the super system, it found 36 per cent of choice super products in their sample underperformed return benchmarks. Almost all of these were offered by for-profit super funds.

“The commission also found that four million Australians were in high-fee funds. Again, almost all of these were choice products run by for-profit super funds.

“In other words, out of the estimated 40,000 super products available, some 10,000 or so could be duds, costing members many thousands of dollars in forgone retirement savings.”

Ms Scheerlinck says the AIST believes the Government must produce an online super comparator tool – using regulator-approved data – on an independent user-friendly website.

“This tool could then be used by anyone who wants to check on their fund, and consumers would be confident that the data was robust and independent, with the appropriate focus on long-term performance,” she said.

“What we all need and want from our super is the financial equivalent of an airplane flight that gets us from A to B – good net returns.

“The super system must provide an easy way for members to make a genuine choice about their super fund if they want to. In the 21st century, this shouldn’t be that difficult.”

Leading consumer advocacy group Choice has also decried the lack of action in creating a mechanism that clearly identifies the top performing funds.

“The Productivity Commission described these gaps as yawning, but six months on, we are still in the dark about which funds are the 29 ‘serial underperformers’ that are hinted at throughout their report,” Choice said in a statement.

“Both the Productivity Commission and royal commission … urged Parliament to stop allowing people to be defaulted into terrible funds, or multiple funds. This was pretty much the headline imperative of both.”

Choice said that prompt payment of super was another area that needed attention, pointing out that “employers have got up to four months to pay super, which means people are foregoing months of extra earnings on their contributions”.

Do you find it difficult to identify the top-performing super funds? Have you switched funds in the past 10 years?

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    COMMENTS

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    BrianP
    30th Jul 2019
    10:09am
    Yet another example of corruption right through our system. This includes Government for failing to do anything about it. You cannot seriously tell me government just turned a blind eye to this for so many years? It is either corruption or negligence at the highest level.

    Strongly suggest what we all really need is a Royal Commission into Government and Ministerial accountability.
    Farside
    30th Jul 2019
    10:29am
    I think the issue leads more to negligence/incompetence than corruption on the part of the regulators and apathy on the part of the consumer. We don't need another royal commission to tell us what we already know. The regulators needs to end their supine behaviour and enforce the existing laws and obligations and start holding directors and auditors accountable. Consumers should be educated to ask questions and seek help if they cannot do the comparison themselves.
    Anonymous
    30th Jul 2019
    12:19pm
    I take issue with the word "corruption" BrianP. I don't believe that there is corruption although there may be bad rules set in place. What we have is a lack of transparency.
    Ahjay
    30th Jul 2019
    1:08pm
    What are political donations if they are not bribes?

    Who pays money without expecting something in return ?
    Sceptic
    30th Jul 2019
    3:03pm
    Perhaps Ahjay, it is just that the donor hopes that the party they support will win Government as they have faith in that party's policies. Maybe your comment is just a reflection of your attitude that you do not do anything for anyone without expecting something in return.
    Triss
    30th Jul 2019
    4:30pm
    Nah, Sceptic, look up the donations to political parties and you'll find many of the donations go to two political parties not only one. Hedging their bets. I agree with Ahjay, companies do not shell out thousands, in some cases hundreds of thousands of dollars unless they know they have a good chance of getting something for it.
    Captain
    30th Jul 2019
    4:44pm
    BrianP, not sure about corruption, however I support you in the need for a RC into Government and Ministerial Accountability.

    The RC into the Banking system showed us where the issues are and recommended fixes. The issue now is, when are the recommendations going to be implemented?

    Do not hold your breath.
    TREBOR
    30th Jul 2019
    7:48pm
    That explains why certain big companies donate to both LNP and Labor........ in case the party with the policies they like wins...

    Ummmm ... wait a minute...
    GeorgeM
    31st Jul 2019
    9:04pm
    Just a corrupt system, allowing profits for some instead of returns to investors, with no proper oversight set up by that fool Keating, and happily supported by both Liberal and Labor Govts since then....So what's new? Same thing with the Age Pension system!

    On the other hand, how hard is it for the Australian Institute of Superannuation Trustees (AIST), to arrange for such a comparison tool funded by the Super Funds themselves?

    BTW, the default Superannuation for politicians (new first-time MPs since 2004) is AustralianSuper, not some shonky Fund, so once again, they have taken care of themselves!
    Peking
    30th Jul 2019
    11:25am
    Both right. The recent Royal Commission revealed corrupt behaviour throughout the industry and has highlighted what must change. We would be remarkably innocent to expect fair behaviour without strict controls of massive amounts of money.
    Regulatory failures to act, we know and have known for years, but that won’t change anything when the current light shed on them fades.
    Even with the light on now, it is still not easy to the many fees (Fund Managers( not shown to clients), Platform, administration, investment costs
    Peking
    30th Jul 2019
    11:30am
    .....and share brokerage, and investment management fees.
    Not easy to educate people about all of them, when they are couched in different ways.
    VeryCaringBigBear
    30th Jul 2019
    11:49am
    I haven't yet found a fund that I would be happy with it's performance. Something is terribly wrong when a person can beat the so called professionals every year.
    Farside
    30th Jul 2019
    12:17pm
    Big Bear, you would be in rare company at beating the pros over the long term and likely only possible because you control your risk and manage a fraction of the funds.
    Not a Bludger
    30th Jul 2019
    1:03pm
    No, Farside - reason is simple - individuals and SMSFs don’t charge themselves the huge management etc fees and costs (let alone forcing people into default funds, unnecessary insurances etc) that the industry and other funds do.
    This compounds up into serious money over time.
    VeryCaringBigBear
    30th Jul 2019
    1:15pm
    Just leaving your money in the bank in an SMSF can at times be better than investing with the pros. It is not hard to outperform the pros and I thought the pros did well last year until I checked the return on my SMSF.
    Captain
    30th Jul 2019
    4:49pm
    Farside, having had a SMSF for more than 20 years, I estimate that I would beat the pro's 2 out of every 5 years, break even with then 2 out of every 5 years.

    One year out of 5 I do not do as well as the pro's.
    Farside
    30th Jul 2019
    8:00pm
    so because you and Captain are canny investors then you extrapolate that to conclude that is the norm. I think not. And I still suspect your returns would reflect the pros if you took on the same risk and managed the same amount of funds.
    Rae
    31st Jul 2019
    11:31am
    My personal savings are in a low cost index platform fund and I consistently beat the Funds year after year with a simple rebalance around once a year.

    Anyone not making big returns through the current boom isn't trying.

    What happens when the fake money stops flowing and rates start to rise?

    If returns are dodgy now in your fund you are going to lose capital if you don't get a handle on what the hell the fund is up to.
    Captain
    31st Jul 2019
    12:49pm
    Farside,

    I do not think I have said anywhere that what I do is the norm, and I make no assumptions to
    point in that direction.

    I have been looking at markets for over 40 years trying to gain some insights. Most people are either too afraid, don't understand or too lazy to stick at what I have done for over those 40 years.

    I maintain that financial matters should be taught in schools (as most parents don't seem to have enough info to teach their children).

    30th Jul 2019
    12:32pm
    What is needed is a number of things to solve what some perceive as a problem:

    Firstly, all funds should be required to submit a return to government on a quarterly basis showing how each asset class is performing. Government should issue a list of all super funds listing the details so clients can choose a fund more suited to their needs.

    Secondly, the fees charged should be shown in an acceptable form to allow comparisons to be made.

    As regards when super deductions held by an employer should be credited to a super fund, I believe that monthly would be acceptable for all parties. The original legislation allowed for funds to be placed at least once a year so quarterly is an improvement. In this day and age, there would be very few, if any, employers who don't use a computer system for wages/salaries so making payments monthly should cause very little additional work.
    Thirdly, employers should be forced to place super funds where the employee requests.
    Sceptic
    30th Jul 2019
    3:06pm
    The previous quarter's result is no guide to future performance.
    VeryCaringBigBear
    30th Jul 2019
    4:03pm
    It's all the hidden fees that is where the problem lies. You know the ones they call expenses instead.
    VeryCaringBigBear
    30th Jul 2019
    4:03pm
    It's all the hidden fees that is where the problem lies. You know the ones they call expenses instead.
    Kram
    30th Jul 2019
    12:48pm
    It’s not difficult, place your super in a low cost Industry Fund (HostPlus Indexed Balanced option) which has a fee of 0.07%
    Dump the Retail Funds with their very high ‘Performance fees, Annual fees, Indirect Cost Ratios & Management Costs’ Which equate to a staggering 1.5-2% / annum
    Therefore, on a balance of $500k, The low cost fund has an annual fee of $350 compared to $7000 in the Retail fund.
    Financial Advisors also take a big slice so be very wary
    VeryCaringBigBear
    30th Jul 2019
    1:13pm
    If I didn't have an SMSF I simply would not have super.
    floss
    30th Jul 2019
    1:51pm
    BrianP you are correct Old Man must be on another planet.
    Rae
    31st Jul 2019
    11:26am
    Good grief!

    And the markets are still raging ahead on all that central bank loot flung at them.

    When the corrections finally arrive there will really be something to whinge about.

    Surely people can check out returns against historical index es and move their funds if they are underperforming.

    It's sheer laziness to expect the Government to do everything for you.
    Captain
    31st Jul 2019
    12:41pm
    Rae, I agree with you. People need to take responsibility for themselves.