Industry super report says retail fund members 'worse off'

SUPER savings invested in retail funds stand to lose $120bn during the next decade, a report says.

Retail fund members will be worse off through fees and underperformance, an industry fund report says / AFP

AUSTRALIANS who invest their super savings in retail funds stand to lose $120 billion during the next decade, a report predicts.

The Industry Super Network, which represents the non-profit superannuation sector, has released a 24-page study comparing the returns of industry and retail funds.

The report has been released to coincide with a federal government review into superannuation, which is due to report in June.

Using government data, the Supernomics report calculated that $47 billion had been lost from retail super funds between mid-1996 and June 2009 because of fees and underperformance.

If these trends continued, Australians who invested their super in retail funds would be $120 billion worse off over the next decade, the report said.

"All of those lost savings are not invested and they're not earning interest - it snowballs," Industry Super Network (ISN) senior economist Sacha Vidler said.

The study found retail funds had delivered returns that were 1.8 per cent weaker, on average, every year compared with industry funds.

"It's pretty startling," Mr Vidler said.

"If you were paying more and getting more, that would make sense but if you pay more in fees you're getting worse returns."

Most financial advisers were declining to recommend industry funds because they were not being paid commissions by them, Mr Vidler said.

The ISN has written to the Government's super review asking for steps to be taken so banks and insurance companies cannot profit from disengaged super members.

But a coalition of commercial superannuation bodies said this would lead to higher management fees.