Super Comparison Tool exposes ‘Dud’ Funds

An article in the New Daily (31 August 2021) reported on the ATO findings that more than a million Australians have invested $56.2 billion combined in “underperforming” superannuation funds, a new comparison tool finds.

The Australian Taxation Office released its findings at the end of August, as part of new laws designed to help workers determine the best place to invest their retirement savings. Published in the ATO’s YourSuper comparison tool, the results revealed 17 per cent of Australia’s 76 MySuper products were underperforming, based on Australian Prudential Regulation Authority (APRA) testing up to August 31. For-profit and corporate super funds accounted for the majority of poor performers, while not- for-profit industry funds were overrepresented among products with the highest returns. The 13 funds deemed underperformers are managing $56.2 billion in retirement savings for 1.1 million Australians, APRA found. Under the Your Super, Your Future reforms passed in June, these funds must now notify their members about their underperformance and could be barred from accepting more if they fail APRA’s test again next year. O’Halloran told The New Daily. “This will break down a lot of that complexity with useful information on which funds are underperforming on a basic fitness test.” Industry Super Australia chief executive Bernie Dean said performance testing would allow consumers to separate the dud funds from the winners.

Underperforming superannuation funds revealed

For-profit retail super funds accounted for 27 per cent of the funds assessed as underperforming in the latest test, which covered 866,000 accounts and about $30.7 billion worth of retirement savings invested. Only 2 per cent of underperforming products were nonprofit industry super funds, totalling 200,000 members and $13.1 billion in savings. But corporate sector funds accounted for 36 per cent of underperformers. This compares to top-performing funds such as AustralianSuper, which achieved a 9.44 per cent net annual return over the same time frame and had annual fees of $387. Another top performer was Hostplus, which achieved a 9.33 per cent net annual return over seven years and had yearly fees of $628.

Tool will ‘break down complexity’

The new comparison tool ranks superannuation funds by their fees and net returns, which are updated on a quarterly basis. Underperforming funds are determined based on how far their net returns fall below the median achieved by other superannuation products. Users can compare funds and even personalise their experience by logging in through the MyGov website, which contains their superannuation data. Super Consumers Australia Xavier O’Halloran said the tool will improve transparency around superannuation funds for workers. “Traditionally superannuation has been a pretty opaque world that’s hard to engage with for consumers,” Mr Corporate sector funds, offered to workers at specific companies, accounted for 36 per cent of underperformers, but covered just 57,000 members with about $6.9 billion in savings under management. By contrast, public sector funds made up just 1 per cent of underperformers, with 13,000 members and $1.9 billion in savings managed. The report lists underperforming funds, as well as those funds performing well, and points out that workers with their super in the underperforming funds could potentially lose many thousands of dollars over the life of their super contributions.

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