Superannuation fund letter “the most important” in your life

Aussies often ignore letters from their super funds, but failing to open this one could be one of the costliest decisions you’ll make.

More than one million superannuation savers have just received a letter telling them their fund failed a new government performance test.

Many others are expected to join them next year when the tests are expanded, and all are being urged to check their super to potentially save hundreds of thousands of dollars.

The federal government recently named 13 poorly performing MySuper funds, which were assessed on investment performance and fees.

These funds included Commonwealth Bank Group Super, Maritime Super, Christian Super and Colonial First State’s First Choice Employer Super Fund, and they were forced to send letters to 1.1 million members suggesting they consider moving their money elsewhere.

Funds that fail the tests for two consecutive years will no longer be allowed to accept new members, and more funds will be tested in 2022.

Industry Super Australia says it’s “incredibly important” that members act on the letters.

Industry Super Australia CEO Bernie Dean says opening your fund’s latest letter is vital.

It says a 1 per cent difference in performance can add up to about $100,000 over a working career, and the difference between a poor fund and a top fund can be up to $500,000 at retirement.

Industry Super Australia CEO Bernie Dean says many people ignore correspondence from their super funds “then kick themselves years down the track when they realise they have been in a dud fund”.

“Now the government has put in place a system that prompts people to think about what fund they’re with,” he says.

“This letter is probably the most important letter they might receive from their super fund in their whole life – it could mean an extra couple of hundred thousand dollars for many of them when they retire.”

Dean says people who received the letter should:

• Open it and read it.

• Use the ATO’s online YourSuper comparison tool to compare performance.

• Consider switching to a better fund, but make sure they don’t lose good-quality life insurance.

Much of the superannuation system is yet to be tested, including the choice sector that was previously found by the Productivity Commission to include the worst performers and charge the highest fees. Several of these funds are expected to fail their performance tests when they are assessed in 2022.

Wealth for Life Financial Planning principal Rex Whitford says every super fund has ups and downs, but it’s important for people in underperforming funds to take a closer look.

“You will need to do some work of your own,” he says.

“People get what they get because they don’t ask any questions.

“It’s a signal to take a look, ask questions, and get proper advice as to why it’s underperforming.”

Whitford says people should not just rely on government measurements that only cover a section of the super sector.