Top super funds revealed. Is yours one?
THEY are super's "best in show" - funds so good they can deliver workers an extra $375,000 in retirement, the Federal Government's top policy advisers say.
News Corp Australia has brought to life the Productivity Commission's new proposal for an official top 10 list of funds by assembling a panel of experts and asking them to select standout super products based on long-term net returns, fees, governance and their record on meeting "member needs".
The commission is recommending a radical overhaul of the way workers end up in super funds after its "unique assessment" of the system revealed:
* a third of all accounts shouldn't have even been opened because the owner was already with another fund, eroding balances by $2.6 billion a year through unnecessary fees and insurance; and
* five million people have MySuper default products whose average performance is so poor it's costing them the equivalent of 13 years' pay ($635,000).
The Commission argues super savings can be dramatically lifted by ensuring workers are only ever allocated to a default product once - instead of potentially getting a new account every time they change job - and encouraging the selection of a top-performer, or what it calls "best in show".
"The best in show concept puts consumers in the driving seat," Choice head of policy Erin Turner told News Corp Australia.
She was the first person to appear at the commission's public hearings on reforms this week.
"It gives people the support to make a high-quality decision instead of leaving it up to the industrial relations system," Ms Turner said.
Young workers in particular are turned off by the complexity of the current system, said Morningstar's research strategy head Anthony Serhan. But it didn't have to be that way.
"If they know they only have to do this once and spend five minutes on it … that might actually increase engagement."
Especially if they have access to simple and trustworthy recommendations, said Dixon Advisory managing director Nerida Cole.
"That's where the Productivity Commission is saying have a shortlist of 10 that have been assessed by an independent panel of experts," Ms Cole said.
"I can see the logic of it," said Chant West head of research Ian Fryer.
But Super Ratings CEO Kirby Rappell there was still a lot of work to do on what the panel would look like, as well as on precisely how funds would be selected.
"There are some real challenges to making the proposal workable in practice," Mr Rappell said.
The "best in show" funds presented here are products that fit the commission's broad criteria. They amalgamate the views of Ms Coles, Messrs Serhan, Rappell and Fryer.
They are not endorsed by the Productivity Commission nor are they necessarily the funds that would make the top 10 list if the idea becomes a reality.
Our Deputy Chair, Karen Chester gives a speech on our draft report on the Super system at the McKell Institute Executive Policy Forum boardroom luncheon @McKellInstitute#issuperperforming? https://t.co/g3tbKwwewm— Productivity Comm (@ozprodcom) June 6, 2018
They are, however, the first serious attempt at compiling the best in show.
Financial Services Minister Kelly O'Dwyer has described the idea as "a really clever solution".
As things stand, a typical full-time worker who is in the median underperforming MySuper product would retire with a balance 36 per cent or $375,000 lower than if they were in the median top-10 product.
Mitchell Starkey recently took control of his retirement savings by joining one of the best in show funds.
Previously he had been with "whatever super fund I was put in" - and not just one. He had as many as three on the go.
He's now has just one, with top-performer SunSuper. The choice was a combination of research and the recommendation of his wife Kristina.
"They've been really engaging," Mr Starkey said. "I've never had that before."