Superannuation jargon confusing investors

WORDING used in super funds' paperwork is often vague, meaningless, confusing and a selective use of truth, according to research.

Paperwork pile

Super jargon confusing investors

MOST people are in the dark about the promises their superannuation fund makes because only one in four uses clear and specific words to describe their investment objectives.

At a time when people are learning the hard way that their super can and has lost money, a new report has found the investment aims of most funds are not clearly stated.

The wording and descriptions of more than 300 fund options was too vague, meaningless, confusing and used selective truth, according to the research.

Jargon skirted around stating specific objectives and investment targets which prevented people checking how their super was performing.

It also meant people could not hold the fund manager to account for under performance, because they could not work out what was being promised, independent research firm SuperRatings reported.

Your rights

This was vital information for everyone, SuperRatings managing director Jeff Bresnahan said, particularly as many people were considering moving their super from one option to another, for example from a share option to a cash option.

"Consumers have a right to be able to clearly understand and measure the performance of their investment options and that such measurements should be consistent across funds,'' Mr Bresnahan said.

However, when it came to the nitty gritty, 75 per cent of the more than 400 investment options surveyed used vague and useless descriptions.

In a typical example, Mr Bresnahan said investors were "provided with a series of non-descript words that in no way brings to the attention of the member that the option can experience a negative return''.

"Further, it appears the member has no way of measuring whether their fund has actually achieved their objective as there are too many ill defined terms relating to both the relativity of the return itself and also the time period,'' he said.

The research company has called for the whole industry to use standard wording such as:
* Performance against the consumer price index.
* State the outcome over an annual time frame, such as one year or 10 years.
* Clearly advise the risk of a loss, such as once in 10 years.

Clarity needed

Lobby group, National Seniors Australia, said the findings support the feedback it has been getting.

"It is a very, very difficult industry to understand, they seem to always be talking another language,'' National Seniors chief executive Michael O'Neill said.

"With all the competition between industry and retail funds they seem to spend a bucketload fighting about where people should put their money.

"So it's about time they spent some of that money communicating more effectively and supporting financial literacy to assist the average punter to understand what's going on.

Understanding fees

The Consumer Action Law Centre has also called for standard terms and specific targets.

"More definitely needs to be done to ensure consumers are clearly informed about their investment options,'' Consumer Action policy officer Sean Carroll said.

"Consumers must also have the opportunity to understand the impact of any fees and inflation on their super investments and the possibility that there may be some years of negative growth.''

After eliminating funds that could not be judged because their objectives were so badly worded, SuperRatings found only 4 per cent - 1 out of 23 fund options - met its three year investment objective.

The results improved on a five year basis when 94 per cent achieved their stated outcome.

Examples of clear wording include:
1. After tax returns 3 per cent higher than inflation.
2. Risk of a negative return twice every 10 years.
3. Returns measured on a rolling five year period.