The Productivity Commission today released their report looking into the $2.6 trillion superannuation industry, and you know the news isn’t good when the system is being termed an ‘unlucky lottery’.
“While the system works reasonably well for some members, it’s become an unlucky lottery that sets the odds against many members,” Productivity Commission deputy chair Karen Chester told the ABC this morning, “The impact is highly regressive. It causes great harm to young people, workers on low incomes and workers in and out of the workforce. These are awkward truths that the industry needs to address.”
The report discovered that more than a quarter of all funds have regularly fallen short of benchmark performance returns. In real talk, that means that about 5 million fund member accounts are being ripped off. You personally could be losing up to $375,000 by the time you retire. Collectively, that’s $3.9 billion for fund members every year.
Basically the ‘lottery’ here is whatever super fund your work signs you up to that you never change, because who actually knows anything about super? So how do you avoid being one of the unlucky people?
Stop being lazy and just accepting a new super every time you have a new employer (me), and actually do your research into top performing funds. The report showed that most of the accounts looked at were not a person’s only super account. By putting in a little effort and keeping just one account at a better-performing fund, a new worker could have an extra $407,000 for retirement in 2064. Even someone aged 55 could accumulate $61,000 by retirement. In expert terms, that’s quite a buttload, so defs worth the hassle.
The Productivity Commission is recommending changes to super fund regulations to hopefully lower fees and introduce a sense of competition and accountability to the industry. They’re also recommending a change in employer behaviour. Instead of having a default, the Commission suggests employees are given a list of the top 10 performing funds to choose from.
So my new plans for the afternoon are finding out where the hell my super is.
UPDATE: I previously wrote “If you’re working in retail you’re particularly screwed, seeing as all your industry super funds are literally the worst, making up half of the bottom 10 list.” An actual financial expert brought to my attention that it wasn’t funds catering to the retail sector, but funds that are usually run by banks or investment companies and generate a corporate profit who took up half the bottom 10 list.
Also, I have since located my super, so gold star for that. Have you?