The Government must develop an online tool to compare super funds, according to new research commissioned by the Australian Institute of Superannuation Trustees (AIST) and conducted by Essential Media.
“A high level of confusion among members of poorly performing super funds points to the urgent need for a government-sanctioned online tool to help Australians make more informed choices about their super savings,” the AIST says.
The research, which involved face-to-face focus groups in Sydney and Melbourne and an online survey of 529 retail fund members, shows that a big proportion of Australians are misinformed about how their super fund is performing and even what type of fund they are in.
It found:
- About one-third of retail fund members think there is no point in looking at past returns to assess performance. The AIST says: Both the online survey and focus group discussions indicate a level of scepticism that past performance is an indicator of future performance. This is despite most evidence pointing to it being a reliable indicator.
- Most members of retail funds believe their funds are performing on par or better than the industry average. The AIST says: On average, retail funds underperform profit-to-member funds.
- Retail fund members struggle to understand the difference between for-profit and profit-to-member funds. The AIST says: One-quarter of for-profit fund members surveyed mistakenly thought they were in an industry fund.
- One-quarter of those who ‘chose’ a for-profit retail fund were encouraged to join the fund by their employer, while nearly 40 per cent received advice from their accountant, financial planner or bank.
The research found there was a healthy appetite for tools that allowed people to make their own decisions. Seventy-one per cent supported a government agency setting up a comparison website to help people compare super funds against each other.
AIST chief executive Eva Scheerlinck says that while standardised reporting has been introduced for MySuper default funds, it is difficult, if not impossible in some cases, to compare funds in the non-default (Choice) sector, where there was almost twice as much in savings under management (more than $1 trillion). Even in the MySuper sector, consumers wanting to compare funds often have to search across multiple fund websites for the product information.
“Many Australians are languishing in poorly performing super funds with no easy way of knowing that their fund is a dud,” Ms Scheerlinck says. “In the 21st century, comparing super funds shouldn’t be that hard.”
“Australians should be able to access independent, reliable and easy-to-understand information to assist them in making informed choices. Right now, this isn’t possible and we know this is a glaring failure of our system.”
A Productivity Commission report released late last year found that a poorly performing fund could cost a worker up to $400,000 over a full working life and even $60,000 for workers aged 55 who planned to work another 10 years.
Alex Dunnin, executive director of research and compliance at researcher Rainmaker, told The Age that all super funds – both industry and retail – needed to do better in communicating with their members simply and effectively.
“Those retail fund members who don’t appear to trust or believe the industry fund story … could be costing themselves big money in foregone superannuation savings,” he said.
Helen Rowell, deputy chair of the Australian Prudential Regulation Authority (APRA), cautions that acquiring information and presenting it in a way that balances accuracy and simplicity is “extremely challenging”.
“The waters are further muddied by a tendency for vested interests to skew the data to paint their sector, fund or product in the most flattering light,” she said in a speech last month.
Are you totally comfortable that your retirement savings are in the best super fund for you? Do you believe the industry needs to provide a better tool to evaluate funds?
If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.
Related articles:
Govt to review retirement income
Super funds’ advice lashed
Super just ‘not going to do it’