It’s the time of the year when your annual superannuation statement hits your mailbox full of numbers and a fair bit of jargon, making it tempting to give reading the document a miss. But that statement holds vital information on the direction of your retirement finances and this year’s should be given some extra scrutiny to see how your super fund performed during the tough financial markets caused by Covid-19.
Overall, the performance of Australian super funds for 2019-20 was better than many might have expected March, April and May. Super research house Chant West reported that the average median growth fund finished the financial year with a loss of just 0.5 per cent, which it called a “pleasant surprise” in light of stockmarket conditions. Conservative funds, which have a far lower exposure to growth assets such as equities than growth funds, made a 1 per cent return, while balanced funds, which sit in the middle of the range on growth asset exposure, made a positive return of 0.3 per cent.
But even among the best-performing funds, not all funds are equal, and that’s what your own super statement will show you – how your particular fund performed. That’s the information that makes a real difference to your super balance (of course, fees are also an important consideration).
For example, Chant West’s top-10 ranking of growth funds shows that, after fees and taxes and before administration costs and commissions, the top-performing fund for the year to June 2020 was Suncorp’s Multi-Manager Growth with a 3.8 per cent return, while Vision Super Balanced Growth was fifth-best at 2 per cent and Tasplan Balanced was tenth at 1.2 per cent. These may sound like fairly small figures but on, for example, a $200,000 super balance, that’s the difference between a return of $7,600 with Suncorp’s fund, $4,000 with Vision Super’s and $2,400 with Tasplan.
SuperRatings, another major super research house, shows different but equally dramatic differences in its first, fifth and 10th-spot rankings, with Suncorp Multi-Manager Growth Fund number one with a 3.8 per cent 12-month return, IOOF MultiMix Balanced Growth Trust at 1.7 per cent and Cbus Growth at 0.8 per cent. (Chant West and SuperRatings use different terms – Growth and Balanced – to compare slightly different groups of funds, in that Chant West defines a growth fund as one that has 61-80 per cent of its holdings in growth assets, while SuperRatings defines a balanced fund as those with 60-76 per cent growth assets. In reality, these risk profiles are relatively similar).
So, it pays to keep an eye on your super fund’s performance (and the fees it charges – see more on that below) over time. But if you haven’t examined your super statement closely before, here’s what to look for.
If you’ve received your super statement in the mail, that’s a cause for celebration. Congratulations! You’ve kept your contact details up-to-date, which is usually the first thing super funds tell you to do so it can maintain constant communication with you. Plenty of people fail to do so, however!
While you’re looking over the paper copy of your super statement, it can be a good idea to open your online super account at the same time. That way, while super’s on your mind, you can update any basic information such as your phone number and check to ensure you’ve nominated or need to change your super beneficiary (the person who’ll receive your funds if you die with funds remaining).
And while you’re on your general admin, if you haven’t checked for any lost super accounts under your name before, it’s worth heading to the Australian Taxation Office site to claim any funds that may be sitting in inactive or lost accounts belonging to you.
Now it’s time to move down the line to see how your balance is tracking. If you’re still working, this is where you can check that your employer is paying the 9.5 per cent super guarantee, as well as ensuring your own personal contributions are going in. You can use the ATO’s handy super estimation calculator to confirm the exact amount you should receive each year from your employer.
Fees can have a surprisingly large impact on your super balance over time. They’re usually shown on your super statement as a dollar amount, a percentage of your balance or both, and are usually deducted monthly. Fees can be charged for admin, investment management, performance (if the super fund’s returns exceed a certain target), financial advice and for switching investment options.
Financial comparison site Canstar.com.au compared the minimum and maximum fees on the default investment options across a range of funds and found that, for a person aged 50-59 with $500,000 in super, the difference between the minimum (0.46 per cent) and maximum (2.34 per cent) was almost $10,000 a year! For the same age group and balance, the average fee is 1.01 per cent.
If the fees you’re paying are eclipsing your contributions or you’re paying through the nose for poor investment performance (see more below on that), it may be time to shop around for another fund. Another way to save on fees is to ensure you’ve consolidated all of your super savings into a single account, as multiple accounts mean duplicate fees.
While it’s important to review the 12-month investment return your fund made – as we mentioned above – also make sure you also look at the big picture that you can see in the 10-year return that’ll also be reported in your super statement. Although past returns are a guide only and the same result may not be replicated in the future, the best funds tend to have a consistently strong performance, even if they’re not always number one on annual charts.
According to Chant West, the top 10 growth funds for the 10 years to June 2020, after fees and taxes and before administration costs and commissions, are led by AustralianSuper Balanced, which has returned an average 8.8 per cent return each year, followed by UniSuper Balanced at 8.7 per cent and Hostplus Balanced at 8.6 per cent. SuperRatings’ 10-year ranking of the same, with AustralianSuper Balanced, UniSuper Balanced and Hostplus leading the rankings.
While checking on your returns, it may be a good time to re-evaluate your choice of investment option if you’re planning a life change in the near- or even mid-term, for example, by revisiting your risk profile if you’re getting closer to retirement and are more concerned about the stability than the growth of your super balance.
If you’re still working, your super fund may be providing you with death and income protection insurance and debiting the premiums from your super balance. While you’re looking at your super, why not double-check the terms and conditions of your cover to ensure you understand what it offers and whether you’re satisfied with the cost.
IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.
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