It is probably not the result that Superannuation minister Senator Jane Hume was hoping for but the big industry super funds have come out on top in the Federal Government’s new superannuation comparison tool.
While that is not a huge surprise given the dominance of industry funds in other performance tables for many years, the outperformance of the industry funds is bad news for some of the “for profit” and industry funds that scale near the bottom of the pack for YourSuper default funds.
While the comparison tool is not yet comprehensive because it only covers 80 default funds at this stage, it is a great start in giving consumers a way of comparing the fees and investment performance of various funds.
Customisable by age and super balance
Importantly, the comparison tool, which is updated quarterly, is also customisable, allowing you to enter age and super balance to arrive at the leading funds for your personal circumstances.
This is vital because some funds charge investment and administration fees differently, making some a better choice for people with a large balance and others better for smaller balances.
Using the example of a 30-year-old worker with a balance of $50,000 in their super fund, AustralianSuper and Hostplus were the best performers, producing 8.1% annual returns over the past six years.
Then came Local Government Super (7.9%), Cbus (7.77%), the Meat Industry Employees’ super fund (7.58%) and UniSuper (7.52%).
Age can change performance figures
The rankings change with the design of products offered to different age groups, with some funds changing investment strategies to preserve capital as members get closer to retirement age.
The meant that Local Government Super dropped out of the top five for a 50-year-old member, with Cbus, the Meat Industry fund and UniSuper rising one place each while Statewide Super made up the top five for this age group.
The real benefit of the tool is that it will allow you to check if your fund has a worse performance or higher fees than others which, combined with the name and shame intentions for poor performers, should reduce the potential for consistently poorly performing funds to keep their customer base intact.
Huge difference between best and worst funds
There is a massive performance difference between the best and worst funds too, with an annual difference of 2% or more between the best and worst funds.
That might not seem much but given the compounding effect of lower returns over time, this can easily add up to a really life-changing difference of several hundreds of thousands of dollars in lost returns over a working lifetime, which should be a strong incentive for keeping an eye on your own fund to ensure it is competitive.
Some of the worst funds using this comparison were the Energy Industry super fund (4.58% annually), CBA’s Accumulate Plus Balanced which is only open to bank employees (5.29%), AMG (5.38%), Christian Super (5.47%) and OneSuper (5.5%), with those rankings not changing if we substitute in a 50-year-old member.
Fees an important part of the picture
On the fee side of the equation, looking at YourSuper funds that are open to the public, UniSuper was the cheapest at $326 a year, followed by Bendigo’s SmartStart Super ($333 fee), AMG Super ($350) and AustralianSuper ($387).
While super comparison lists have been produced for many years, this is the first time funds will face action for sustained underperformance.
Those that fail the performance test will initially have to tell their members about their underperformance and if they don’t improve, they eventually won’t be able to take on new members at all.
This measure is likely to continue the consolidation in the super industry, with weaker funds being swallowed by funds with better investment and administration systems and lower fees.
That consolidation is also likely to happen across the spectrum of different funds, including industry and for-profit funds.