Worst performing Australian super funds identified, cost members $230,000

Alarmingly, around $10 billion of Australians’ retirement savings are invested in dud products but many wouldn’t know the “harm” they are suffering.

Aussies left in “dud” superannuation funds could miss out on up to $230,000 at retirement as a new report reveals some of the worst performing products.

Alarmingly, around $10 billion of Australians’ retirement savings are invested in dud superannuation products, the data from the Australian Prudential Regulation Authority (APRA) showed.

Yet, stopping underperforming funds from taking on new members will not save those languishing in dud products, according to Industry Super Australia.

APRA’s heatmaps found that two thirds of products that are closed to new members were poor or “significantly” poor performing products.

The heatmaps show eight year returns on funds annually in a move to identify duds and encourage members to switch.

ANZ’s OneAnswer Personal Super fund option was declared the worst performing of any over the eight years to June 30, 2022, with returns of negative 0.003 per cent.

Other funds singled out for providing poor returns to Australians included the Commonwealth Bank-backed Colonial First State, Westpac-owned BT Retirement Wrap, Energy Industries Superannuation Scheme and Equity Trustee,

Choice options allow members to choose their investment options, rather than default settings for MySuper products.

APRA Deputy Chair Margaret Cole. Picture: John Feder/The Australian.

APRA Deputy Chair Margaret Cole said there are still far too many products delivering substandard investment returns to fund members.

“As a result, APRA’s supervision of poorly performing Choice products will intensify, and trustees can expect even greater scrutiny of their product offering,” she said.

“Trustees with products that are underperforming or have unjustifiably high fees – or both – will need to explain why they haven’t already moved their members to products with better performance and better fee structures.”

Consumers in choice products are also being slugged with higher fees.

The average annual administration fee for members with an account balance of $50,000 in closed choice products was $225, compared with $149 for open products and $137 for MySuper products.

Funds identified for charging high fees include Spaceship Super, Slate Super, Student Super and Future Superannuation Group’s Verve Super.

Those in choice funds are also paying higher fees. Picture: Supplied

The analysis of choice super fund options found four are delivering negative returns, 48 are smashing customers with “significantly high” fees compared with other funds, and 80 are performing very badly – yet 49 of these products are still accepting new members.

About a third of the products assessed by heatmaps were a dark crimson for their “significantly” high administration fees, while the median choice administration fee is far higher than the median MySuper administration fees.

Yet, while MySuper products that fail the annual performance test see members receive a letter from APRA alerting them of the result, this does not happen with choice products.

Many Aussies wouldn’t know how badly their fund is performing. Picture: iStock

Industry Super Australia. deputy chief executive Matt Linden said the heatmaps showed once again that more needs to be done to connect members to high-quality super funds.

“Closing products to new members is no punishment to many of these dud funds and in some cases is their business model,” he said.

“It is disappointing for members whose funds won’t face a performance test that they will continue to be kept in the dark and if these findings are anything to go by millions are most likely stuck in a dud choice product.

“In a compulsory system, disengaged members should not be left languishing in a dud super fund. The government needs to upgrade consumer protections, so members are only stapled to the best funds, who have passed the performance tests.”

Super Consumers Australia director, Xavier O’Halloran. Picture: Supplied

Super Consumers Australia director, Xavier O’Halloran, added it was “appalling” that after several years of transparency, almost half the funds in this major segment of the market are still delivering high fees and poor investment performance.

“We welcome greater scrutiny promised by the regulator, but these funds also have to take responsibility given they have a legal duty to act in the best financial interests of their members,” he said.

“Some of these funds clearly shouldn’t be in the market, so we are calling on them to stop inflicting harm on the retirement savings of hundreds of thousands of Australians. Either slash your fees or exit the market altogether.”

But he was also critical that performance heatmaps released by the regulator covered less than half of the money in ‘choice’ investment options.

Major parts of the market, including options sold through platforms and to people in retirement are not disclosed, he explained.

“It is highly concerning that so many products in the superannuation market face no public scrutiny or repercussions when they fail to act in the best interests of their members,” he said.

Originally published as Worst performing Australian super funds identified, cost members $230,000