- Online investment adviser Stockspot has ranked the best and worst performing super funds for 2020.
- They show that Australian superannuation funds are returning anywhere between 9% and -2% returns.
- With fees having the potential to move retirement balances by $200,000 over a working life, CEO Chris Brycki says it pays to choose the right fund.
- Visit Business Insider Australia’s homepage for more stories.
Superannuation. Everyone has to have it but most don’t bother to make sure they’re getting bang for their buck.
However, given being in the wrong fund could cost you more than $200,000 over a working life, it pays to pay attention.
It’s why every year online investment adviser Stockspot crunches the numbers to rank the very best and very worst of the industry. This year it comes as debate rages over the entire super sector.
“There’s definitely a lot more political noise this year with the early withdrawal scheme but it’s interesting that even with that, and after a productivity commission and a royal commission, the worst funds this year are similar to the worst in previous years,” Brycki said.
“In what other instance could you have such a poor performing product but customers keep on buying it regardless?”
Some Liberal MPs make a similar point in protesting the compulsory nature of the scheme. However, politics aside, while the superannuation system’s objective is sound – to help Australians fund their own retirement – it’s clear that there is plenty of room for improvement.
Australians unwittingly pay billions in fees
The biggest problem is that the cost remains far too high among many funds, Brycki says. It’s estimated that between $33 and $34 billion is pilfered by fund managers in fees every year. While the super industry has grown to around $3 trillion, it’s a staggering figure and one all Australians would do well to slash.
“That’s roughly the same amount of money that has been taken out under the early release scheme so far. I can understand why people are angry to know some funds are freeloading and charging Australians for unnecessary management,” Brycki said.
Many efforts to reform the sector so have so far fallen flat, with plenty of workers simply accepting what they get.
“If people don’t make a choice and are put in a default MySuper fund they should be paying less than 0.5% in fees because there’s not a great deal of administration. Most of those funds are over 1% and some are even higher,” Brycki said.
Nor is comparing funds an easy task. The data funds provide is in a completely inconsistent format, and it takes two Stockspot analysts weeks to collate the ranks each year.
The performance this year
It’s why fees understandably take centre stage in the ranking.
Secondary to that of course is how hard a fund is making members’ money work for them. But that comes with a big caveat.
“It’s dangerous to just be jumping into the best-performing fund,” Brycki said.
There’s a whole host of reasons why a fund might punch above its weight one year only to be knocked down the next, for example. Past performance is no indicator of future performance, as they say.
There are two prime examples in this report.
“The best funds this year were ethical and sustainable funds and the reasons for that are pretty simple. Instead of investing in oil which was one of the worst sectors over the last five years, they invested in the tech sector, one of the best. Will they do just as well over the next five years? Maybe. Maybe not,” Brycki said.
“Meanwhile an AMP fund managed by economist Shane Oliver, who is often on TV, has gone from being one of the best performing funds to being one of the worst. All the evidence shows active management doesn’t deliver the best outcomes for members.”
These are the final rankings of the best and worst super funds.
The 10 best and worst aggressive growth superannuation funds
Aggressive growth super funds are funds with at least 80% in growth assets like shares and property. Volatile over the short-term, they are typically targeted at investors with a very long investment horizon.
The 10 best and worst growth superannuation funds
Aggressive growth super funds are funds with between 60% and 80% in growth assets. Volatile over the short-term, they are typically targeted at investors with a long investment horizon.
The 10 best and worst balanced superannuation funds
Balanced super funds are funds with 40-60% in growth assets and are generally targeted at investors with a medium to long investment horizon.
The 10 best and worst moderate superannuation funds
Moderate super funds are funds with 20-40% in growth assets. Relatively stable over the short term, they are generally targeted at investors with a short to medium investment horizon.
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