Superannuation expert Alison Banney said millions of Aussies aren’t checking on their fund’s performance and it can cost them dearly in retirement. (Source: Finder/Getty)
Many Australians have no clue how well their superannuation fund performed in the last year and one industry expert is sounding the alarm about this potentially costly apathy. Workers can move their retirement nest eggs to a better fund if they feel their current one isn’t giving them the best returns.
Fresh data from consumer group Finder found as many as 6.2 million people wouldn’t be able to make this call because they’re oblivious to what’s happening with their investment fund. Finder’s super expert, Alison Banney, said too many people treat their retirement fund as an “out of sight, out of mind” asset.
“Because the super guarantee is paid directly to your super fund by your employer, many give this money very little attention,” she said.
“This ignorance could cost you tens of thousands of dollars come retirement due to reduced returns.
“If you’re not monitoring your super’s performance, you could be leaving the equivalent of an entire year’s salary – or more – on the table by the time you retire.”
Considering the average Aussie salary is just over $100,000, that’s a lot of money that people could be missing out on.
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According to the Association of Superannuation Funds of Australia (ASFA), it costs around $53,289 per year to have a comfortable lifestyle as a single person in retirement. For couples, that annual amount is $75,319.
Meanwhile, a modest retirement requires $34,522 a year as a single person, and $49,992 as a couple
“The difference between an average fund and a top-performing fund can be the difference between just scraping by in retirement and living comfortably,” Banney said.
“You want to be checking how your super fund is tracking at least annually compared to the rest of the market and whether you are still in the right type of fund for your stage of life.”
Interestingly, a poll of more than 1,700 Yahoo Finance readers found 56 per cent felt they would need more than $1 million to have a comfortable lifestyle.
Finder revealed only 55 per cent of people surveyed are happy with their super fund’s performance.
The rest was made up of people who weren’t happy or had no idea what happened with their fund.
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Over the last few months, super funds have been sending out letters to accountholders indicating what happened in the last 12 months with their investment mix.
For those who want to make a change, the first step is analysing how their fund compared to the rest of the market.
Services Australia’s myGov has a tool where Aussies can input their age and super balance, and it will show a range of options. This is contained within the Australian Taxation Office’s (ATO) section of myGov, under superannuation.
After putting in those personal details, the page will show dozens of funds and indicate whether it’s performing or underperforming, the annual fee, and its 10-year net return.
Yahoo Finance tried this and the top fund’s performance was 8.3 per cent, and the lowest was 6.28 per cent.
Selecting four funds produces a much more detailed breakdown so that Aussies can compare with their current fund.
Workers are encouraged to do their homework and find a fund that works for them and their retirement goals.
The myGov ATO tool allows Aussies to compare super funds to see what is right for them. (Source: myGov/ATO)
This is called a rollover, and the ATO said Aussies need to ask two very important questions before they get underway.
“Ask your existing super fund about any fees or charges that will apply or any loss of entitlements such as life insurance,” the tax office said.
“You should also consult the receiving super fund to make sure they will accept a rollover of your super.”
Workers will also need to speak to their employer to make sure the compulsory 12 per cent super contributions go into the new account as well.
Some super funds will do all the legwork in the rollover, whereas others might need more information from the person electing for a rollover.
“Check that both the account you’re planning to transfer super from and the account you’re planning to transfer it to are still open, as there can be delays in funds reporting closed accounts to us. Check that neither of the funds have restrictions on actioning the transfer,” the ATO added.
The tax office has produced a checklist of what to consider before launching a rollover:
Differences in fees can make a big difference to the amount you have when you retire
The fund you want to leave could charge administrative fees and exit or withdrawal fees
The fund you want to transfer to may charge entry or deposit fees
The fund you want to leave may insure you against death, illness or an accident that leaves you unable to return to work. If you leave this fund, you may lose these entitlements – check if the other fund offers comparable cover. ATO online services flags any super account that has insurance included with a ‘Yes’ indicator
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