Australia's Worst Performing Default Super Accounts Revealed
Thousands of Australians have fallen victim to the ‘unlucky lottery’ of the country’s superannuation system, trusting their retirement funds with poor performing accounts that have costly consequences.
Super Consumers Australia on behalf of consumer advocacy group CHOICE has examined the performance of 'MySuper' default funds over the last five years to see which were ripping off workers.
'MySuper' is a federal government initiative that sees default funds created for Australian employees who have not selected a super fund. They were designed as basic funds without unnecessary fees and features.
IS YOUR FUND A POOR-PERFORMER? CHECK BELOW
From January 2014, employers were required to choose a 'MySuper' product as their default super fund.
From 2017-18, Super Consumers Australia found more than 176,000 new accounts created within 'MySuper' products were in the bottom 25 percent of funds based on their returns.
The lowest account -- from Pitcher Retirement Plan -- delivered 4.99 percent to 721 people last year.
This is compared to the top 25 per cent of funds delivering at least a 7.93 percent return during this same time period.
One of lowest performers was BT Super’s MySuper product -- BT Super for Life -- which has 470,705 accounts (76,000 new members). That fund only delivered a 6.67 percent return.
Xavier O'Halloran, Acting Director for Super Consumers Australia, said more than one million Australian super accounts were considered bottom of the barrel in terms of their returns.
THE LOWEST PERFORMING AUSTRALIAN SUPER FUNDS
O'Halloran said the country's super system was like an 'unlucky lottery' for too many Aussies.
“These superannuation laggards continue to attract tens of thousands of new members each year through a badly designed default system," he said.
"What's worse is that we know the industry is resisting changes which would ensure people end up in better-performing products."
The Productivity Commission has spent three years studying the efficiency and competitiveness of the superannuation system, sounding the alarm on "chronic" underperformance of funds and workers' unintentionally accumulating more than one account.
The commission found that if a worker opted to go with an underperforming super account that was chosen by their employer, they could be up to $502,000 worse off by the time they retired.
The commission acknowledged in January that default 'MySuper' accounts are necessary for a compulsory superannuation system, it felt employers should be offering the highest-performing default funds to their staff.
This recommendation was reportedly met with resistance from parts of the Coalition government, the Opposition and the funds-management industry.
Super Consumers Australia is now urging the government to take action by ending the creation of duplicate accounts and ensuring workers are made aware of the best performing funds.
“We need the regulators to take real action to weed out these laggards, but we acknowledge that this will take time," O'Halloran said.
"The regulators job will be made much easier if we stop growing underperforming products through a poorly designed default system."