The $688,000 mistake you could be making

Crazy $688,000 mistake you can avoid

Our Chief Investment Officer, Craig Swanger, shows you how to avoid a common super danger that can cost you $688,000 of your money. With decades of investment experience, this is a finance guru you can trust, so listen up…

Each year the official superannuation umpire, APRA*, publishes a list of super funds that have performed so poorly that these funds are forced to write and apologise to their members.  If these super funds fail again, they are banned from letting new members join. When a busy government department takes the time to make such a bold move, you really need to pay attention. Because it is a BIG deal. And it’s your cash they are looking out for.

Named and shamed 

13 funds were named in 2021 and four of these failed again this year. Think it doesn’t affect you? You might want to double check. 1.1 million people got a letter in 2021 about their super funds’ poor performance, and then in 2022 a staggering 550,000 of these people got that second letter. 

Here’s why you need to sit up and pay attention. 

An extraordinary 92% of people ignored those letters and stuck with their underperforming fund.  

What’s worse, by ignoring those letters, most Australians missed the fact that those underperforming funds have sold to or merged with other funds.  

More than 500,000 of those people who were transferred to a new fund, have gone to a fund that is also underperforming (just not named and shamed… yet). 

Is your super in bad hands? 

Aussies ignore these letters because the industry makes it so confusing, and because the average person isn’t aware that superannuation has benefits for them now – not just in retirement. Plus the decision to switch is complex and too hard – seriously, most people can’t be bothered. So the result is most Aussies ignore it and hope their employer (or adviser) will take care of it for them.  

Big. Mistake. 

There is a massive difference and benefit to gain from dumping a poor performing fund.  According to the government’s productivity commission, switching out of poor performing funds could make $660,000 difference to the average worker’s retirement.  

That’s $855.96 per week, every week for 25 years in retirement. And that’s just the government’s estimates!  

Or going from bad… to worse?! 

Using decades of financial services and investing experience, we conducted our own investigation into these numbers to uncover more data on superannuation funds and their performance. Our Fierce Performers research (culminating in the Fierce Performers Index) is Australia’s only independent research comparing funds over the past 20 years, across multiple market conditions, fund options, and adjusted for all fees and asset allocations. 

In our research, we estimate costs of leaving your super, assuming (as the government analysis did) that past poor performers remain poor, and past strong performers remain strong. Our result is a $688,000 difference, very similar to the government’s estimate of $660,000, albeit using specific funds instead of the generic examples that the government’s analysis used.  

What’s more alarming is that the funds that the “named and shamed funds” transferred their members to, have actually had slightly worse performance in the past, largely due to higher fees. So the potential cost to you (if you are in one of those funds) is actually worse!

*Using the Lifecycle 1990s fund as an example 

What you can do about it 

We can’t emphasise this enough… Read communications from your super fund. All of them. 

When you get a letter from your superannuation fund that says “we’re sorry”, pay attention. It’s your money. You are paying those super funds. You might not get a bill from them, but that’s because they can just take their fees from your super balance.  

Yes, these letters are about as interesting as the ingredients list on the back of a frozen pizza. But the frozen pizza won’t cost you $855.96 every week for 25 years. Ignoring these letters could.  

Don’t be a super schmuck

Why don’t people change out of clearly underperforming funds? That’s a big topic that we will address in some future posts. But for now, here are a few tips:

  • People believe what their super funds tell them, and sadly many of the super funds choose comparisons that paint them in a positive light
  • Many people believe their employer knows what’s best for them… but you are an individual so how can they truly know?
  • Most of us are more focused on today than the future. But when it could be robbing your retirement of thousands, that’s gotta change

You’re not a schmuck. But super can be confusing so stay tuned and we’ll show you how to go from “I dunno” to ‘Super Spert’ in no time. 

*Australian Prudential Regulatory Authority 

**Index of performance over the past 20 years, across MySuper and Choice products, across different market cycles, and taking into account actual fees charged by each fund 

General information only

Finance topics we discuss in our videos, on our website and in other marketing material is general in nature. It doesn’t take into account your personal circumstances, your financial situation or your specific needs. You should consider seeking independent legal, financial, taxation or other advice to check how this information relates to your unique circumstances.
Super Fierce Pty Ltd (ABN 22 632 423 575) is the holder of Australian Financial Services Licence (AFSL no. 534567).

“We’re sorry we’ve peformed badly!” If you get a letter from your super fund saying that, pay attention!  That’s your money. And you are paying your super fund to grow it, so you can retire well. If they aren’t, then it’s time to ask questions and find a better place for your hard-earned moulah. 

Super letters are about as interesting as the ingredients on the back of a frozen pizza box. But the frozen pizza won’t cost you $855.96 every week for 25 years. Ignoring these letters could.

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