Superannuation: Why the compulsory rate shouldn’t rise just yet
Super funds are eagerly awaiting the compulsory rate hike that will boost their trillion-dollar fund pool, but for everyday Aussies, there’s good reason the figure shouldn’t be lifted to 12 per cent.
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The compulsory superannuation rate should not rise to 12 per cent just yet.
This will make a lot of people irate, particularly those very rich super funds and industry fat cats who make a motza from our hard-earned savings.
The super industry has more than 15 million members and they hold $2.7 trillion in assets.
Not bad, really.
And if all goes as planned, the superannuation guarantee rate of 9.5 per cent will increase in increments to 12 per cent by July 2025.
The other day I whipped out my latest super statement to get a grip on what on earth I’m paying for.
My retirement savings are tucked away with one of the nation’s biggest super funds and doing just nicely.
In the last financial year my balance climbed by a whopping 15.6 per cent.
Incredible really.
Like millions of other Australians I’m handing over 9.5 per cent of my salary every week to my super fund and watching my retirement pot grow.
But what I don’t clearly understand — and I know there’s many other people who will be in the same boat — is the exact fees I’m paying and what they are for.
I scrolled through my statement to find an administration fee of $9 per month, and my monthly insurance premiums of about $62 per month.
My fees seem low but I don’t truly know how the fees are calculated and how they compare.
Where’s the one-stop-shop to compare our charges alongside each other?
We have yet another inquiry coming our way, this time into super, prompted by a scathing report of poorly-performing funds.
And I believe the superannuation industry has failed to be transparent on fees.
This needs to be cleaned up before these funds get their hands on more of our hard-earned money.
Australians shell out a whopping $30 billion a year in super fees alone.
That’s a staggering amount.
This year’s Productivity Commission report found “reported fees in Australia are higher than in many other OECD countries”.
It also showed annual fees alone on super accounts exceed 1.5 per cent of balances for an estimated four million member accounts holding a massive $275 billion.
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It also pointed out high exit fees in some products could create a barrier to members switching funds.
The spotlight is already on the super fund industry with the rollout of the nation’s new ratings system which will classify funds into red, amber and green-based funds.
Green will be the best, while red the worst.
The banking regulator, the Australian Prudential Regulation Authority, will publish the ratings of 100 or more MySuper products after analysing their risks, fees, insurance and fund sustainability including net growth.
Underperforming funds don’t want this because it will single them out.
Superannuation is a very important tool to keep more Australians off the pension and have them ideally self-funded once they stop work.
But the industry needs to become much better and be transparent to members before being allowed to take 12 per cent of our salaries.