Commissions cut into super

SALES commissions are eating up $765 million of compulsory superannuation savings every year.

Commissions cut into super

AUSTRALIANS are kissing goodbye a staggering $765 million of compulsory superannuation savings every year through the payment of sales commissions.

And when voluntary contributions to retail funds are included, the total swells to $2.16 billion in the past year alone.

The new research from Rainmaker shows that many workers who simply accept the default fund are paying for financial advice they never receive.

Industry Super Network spokesman David Whiteley said he was stunned when he first read the results of the research the group had commissioned.

"When you realise that people are forced by law to make these contributions, it seems morally wrong and is depriving people of their rightful retirement savings.''

While industry super funds claim to boost retirement savings by keeping fees low and getting good investment returns, Mr Whiteley said he thought some government action was needed to tighten the criteria for default funds.

Pointing to recent comments by Reserve Bank deputy governor Ric Battellino, he said disclosure alone was not enough to help workers make good decisions about their superannuation.

"Particularly when you look at compulsory contributions, we think commissions should be banned on these.''

In the meantime, Mr Whiteley said workers needed to get active about their superannuation and check statements carefully to make sure they are getting full value for fees and commissions that are being taken out.

One common trap happened when employees changed jobs and their superannuation was automatically transferred into a higher cost retail fund.

"It is a classic distribution strategy by which people are swapped out of a low-cost master fund and into a high-cost retail fund.''