Financial planner Chelsea Fletcher explains why it is very important to check exactly which fund is looking after your super.
Dreaming of long, leisurely days in lovely places when your working life ends is not enough. There are important steps to take to make the most of your super, and one of them is identifying the right kind of fund.
For example, take these three words: ‘compare the pair’. You hear them at the start of many advertisements for industry super funds. The ads tell a straightforward story: if you’re not in an industry super fund, you could be paying sales commissions and higher fees on your super. Bottom line: that could mean you end up with signifi cantly less money in your final retirement payout.
And they’re not just talking about a few dollars here and there. Quite often, the diff erence adds up to many thousands of dollars. But how many of us actually take the time to compare funds? It could be the diff erence between spending long, leisurely days in the sun and simply dreaming.
How we can really tell the difference
According to the Australian Prudential Regulation Authority (APRA), the offi cial Government super regulator, on average, industry super funds have outperformed retail funds for the past 10 years.
In fact, APRA recently reported that average annual fees for an investor with a $50,000 account balance over fi ve years from July 2001 to June 2006 is $1,222 for members of retail master trusts – four times higher than the comparable fi gure of $305 for industry super fund members. Retail funds also charge four times the level of exit fees of industry super funds. That can be a lot of money when added up over a number of years and interest on the diff erence is compounded.
Research by superannuation ratings agency SuperRatings shows that, on average, industry super funds have delivered superior investment returns compared to retail super funds over one, three and fi ve years to 31 December 2008 in a balanced option.
Thousands of dollars variance
On average, Industry Super Funds charge less in fees than Retail Master Trusts. SuperRatings has found that the average working Australian could have tens of thousands extra in retirement by switching to an industry super fund.
SuperRatings has also found that over the five-year period up to 30 September 2008, on average, industry super funds delivered $10.80 in earnings for every dollar taken out in fees. By contrast, retail funds, on average, delivered just $4.40. Over your lifetime, seemingly small differences in fees could add up to thousands of dollars more for your retirement.
Yet, as David Whiteley, Executive Manager of the Industry Super Network points out: “Despite the clearly superior performance of industry super funds, none of the 30 major fi nancial planning businesses has an industry fund on their approved product list. Not one. The people who should be recommending industry funds simply aren’t.”
Never take the costs or results of your super fund for granted
Take a small amount of time and do your own comparison. Switching funds isn’t difficult. In fact, it’s far less painful than fi nding out in 10, 20 or 30 years that your retirement dreams are only ever going to be just that – dreams.
Chelsea Fletcher is a qualified financial planner with Industry Fund Financial Planning, a division of Industry Fund Services Pty Ltd ABN 54 007 016 195 AFSL 232514. For detailed information about industry super funds and to use a free super fund comparator service, visit www.industrysuper.com or call 1300 881 371
Super: help ensure your dreams come true
Dreaming of long, leisurely days in lovely places when your working life ends is not enough. There are important steps to take to make the most of your super, and one of them is identifying the right kind of fund.
For example, take these three words: ‘compare the pair’. You hear them at the start of many advertisements for industry super funds. The ads tell a straightforward story: if you’re not in an industry super fund, you could be paying sales commissions and higher fees on your super. Bottom line: that could mean you end up with signifi cantly less money in your final retirement payout.
And they’re not just talking about a few dollars here and there. Quite often, the diff erence adds up to many thousands of dollars. But how many of us actually take the time to compare funds? It could be the diff erence between spending long, leisurely days in the sun and simply dreaming.
How we can really tell the difference
According to the Australian Prudential Regulation Authority (APRA), the offi cial Government super regulator, on average, industry super funds have outperformed retail funds for the past 10 years.
In fact, APRA recently reported that average annual fees for an investor with a $50,000 account balance over fi ve years from July 2001 to June 2006 is $1,222 for members of retail master trusts – four times higher than the comparable fi gure of $305 for industry super fund members. Retail funds also charge four times the level of exit fees of industry super funds. That can be a lot of money when added up over a number of years and interest on the diff erence is compounded.
Research by superannuation ratings agency SuperRatings shows that, on average, industry super funds have delivered superior investment returns compared to retail super funds over one, three and fi ve years to 31 December 2008 in a balanced option.
Thousands of dollars variance
On average, Industry Super Funds charge less in fees than Retail Master Trusts. SuperRatings has found that the average working Australian could have tens of thousands extra in retirement by switching to an industry super fund.
SuperRatings has also found that over the five-year period up to 30 September 2008, on average, industry super funds delivered $10.80 in earnings for every dollar taken out in fees. By contrast, retail funds, on average, delivered just $4.40. Over your lifetime, seemingly small differences in fees could add up to thousands of dollars more for your retirement.
Yet, as David Whiteley, Executive Manager of the Industry Super Network points out: “Despite the clearly superior performance of industry super funds, none of the 30 major fi nancial planning businesses has an industry fund on their approved product list. Not one. The people who should be recommending industry funds simply aren’t.”
Never take the costs or results of your super fund for granted
Take a small amount of time and do your own comparison. Switching funds isn’t difficult. In fact, it’s far less painful than fi nding out in 10, 20 or 30 years that your retirement dreams are only ever going to be just that – dreams.
Chelsea Fletcher is a qualified financial planner with Industry Fund Financial Planning, a division of Industry Fund Services Pty Ltd ABN 54 007 016 195 AFSL 232514. For detailed information about industry super funds and to use a free super fund comparator service, visit www.industrysuper.com or call 1300 881 371