Students are unwittingly losing hundreds of dollars through default super funds

A survey of more than 3500 young Australians reveals nearly half don’t know how super works and could be paying up to $1200 in fees through default super funds.

A Macquarie University student says her superannuation was gouged without her knowledge through fees and insurance she didn’t need.

The 21-year-old began her working life at McDonald’s in her mid-teens and had little knowledge about how super worked, and recent research shows she’s not alone.

A survey of more than 3500 young Australians reveals nearly half don’t know how super works and a little less were unsure how much they had in their fund.

Carla, a chiropractic science student who didn’t want her surname used, said she was “very disappointed” her fund with Rest Super unwittingly charged her for administration fees and insurance she didn’t ask for, such as disability and life cover.

“When I got my new job they also made it with Rest, and it had reactivated that account which had zeroed out in fees previously,” the student said.

Carla said she lost about $50 from her fund before she was 18, and when she got her new job in a call centre she realised about $330 had been eaten up.

“I was very disappointed. You don’t even know you have insurance because unfortunately it’s not an opt-in, it’s an opt-out.”

Andrew Maloney, chief executive of Australia’s first fund created for students, Student Super.

The survey was conducted by Student Services, the sister company to a new fund, Student Super, launched this week which doesn’t charge members fees who have less than $1000 in their fund.

Students commonly have multiple casual and part-time jobs before they enter the full-time workforce.

And if each is with separate funds, the fees can rise fast.

Student Super says fees could be as high as $1200 if the individual had four different jobs with different accounts.

“Students can have as many as six different employers before they turn 25,” Student Super chief executive Andrew Maloney said.

“But because they’re usually not thinking about their long-term financial goals, they’ll go with whatever the default super fund is each time.”

Nearly 70 per cent of students surveyed said they simply used the default super their employer had set up for them.

“What they don’t realise is that they’re paying duplicate fees with each fund, which can eventually whittle their super down to nothing,” Mr Maloney said.

“That’s a whole decade’s worth of contributions that could make a real difference to their super balance down the line.”

1/2 Today we released the final @ozprodcom report which we commissioned into the superannuation system. It found that while the system has served Aust ‘reasonably well’, there are significant issues to address. We are committed to putting the interest of all members first. pic.twitter.com/cDc38079Rp

— Josh Frydenberg (@JoshFrydenberg) January 9, 2019

In a statement provided to news.com.au, Rest Super defended the need for members under the age of 25 to have total and permanent disability and income protection insurance provided on an opt-out basis.

“The ability of a young person to earn income in future years is their most important asset. Based on our claims experience, the insurance cover Rest provides protects this asset in the event that a young member becomes unable to work because of injury or illness,” the company said.

It said the insurance provided for Rest is relatively low cost and would otherwise be beyond the affordability of members outside their super account.

“We are committed to informing members about the insurance cover they have with Rest — the details of cover are made clear to new members when they join and as part of their regular statements thereafter,” it said.

“If a member decides they no longer want the cover it is a simple process to opt out, by app, online or over the phone.”

On Thursday, the Productivity Commission released a report strengthening support to grapple with the high number of unintended multiple accounts Australians hold.

About a third of accounts, or 10 million, are accidental multiples, the authority’s investigation found.

Carla said she’d like the communication from employers and super funds to improve.

“Especially for insurance — it should be very clear as to whether they offer insurance or not and how much it will be,” she said.

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