It’s real dollars for real people.
For example, over the past 15 years, according to ratings house Chant West, industry funds have returned an average of 8.1 per cent a year.
The “retail” funds have returned 7.2 per cent.
That 0.9 of a percentage point difference may not look like much, but it is. The figure of 8.1 is 12.5 per cent higher than 7.2.
So, for every $1000 earned by a retail fund, an industry fund will earn on average, $1125.
Over the course of a working life, particularly as fund balances become large, the difference in the retirement incomes offered by the retail and industry funds also becomes large.
The top 10 performing growth funds in the 2017-18 financial year.
Banks using different cost structures
Having said that, this is not intended to be an advertisement for industry funds. It’s just the facts.
This is also not a bank-bashing exercise.
The banks and AMP have very different cost structures to industry funds, which plays a big part in why their funds underperform their industry counterparts.
Profits, which are demanded by shareholders, and fees and commissions which need to be paid to large armies of financial advisers, are two burdens that industry funds don’t carry.
It is what it is though, and every year the millions of Australians who have their super in good industry funds do better than those in “retail” funds.
They are an equal partnership between employers and unions, neither having any impact on the returns to fund members.
Contrast that to the bad behaviour of banks over many years and the destruction of the life savings of many thousands of people.
It was the poor behaviour of the Commonwealth Bank that prompted the government to announce the royal commission into banks. And as we all know, the revelations there have been at times horrific.
Which raises the question: Given that superannuation is designed to provide retirement incomes, and given that industry funds consistently do it better than the banks and AMP, why is the government so opposed to industry funds?
One might also ask why is the government seemingly unconcerned that the bank and AMP-owned super funds deliver much poorer outcomes for their customers?
Surely that is the real issue. The retirement incomes of Australians.
And one other point.
The Productivity Commission has recommended that “default” funds, which are worth about $600 billion, no longer be enshrined in the industrial award system.
Instead, it wants an expert panel to choose the 10 best-performing no-frills funds, from which default funds would be chosen.
(A default fund is the fund into which your employer makes superannuation contributions on your behalf if you do not choose a fund yourself).
The banks and AMP have campaigned hard to get a much bigger slice of the default market.
They’re largely locked out at the moment because unions and employers decide default funds between themselves and they naturally favour industry funds.
But on the current super fund results though, even if the Productivity Commission recommendations were adopted, industry funds would dominate the list.
-ABC
The New Daily is owned by Industry Super Holdings
