Want to boost your retirement income by 40%? Check your super fund’s performance

At the risk of stating the bleeding obvious, your superannuation fund’s investment performance matters

So why state it? Because Productivity Commission research released in May found that millions of Aussies have their retirement nest egg languishing in the 25 percent of funds that consistently underperform their peers, with fees and insurance premiums further eating away the sub-par returns achieved by the funds’ investment managers. The members of such funds see their retirement incomes reduced by as much as 40 percent as a result, the commission found.

With such a high personal price to pay for sticking with an underperformer, why don’t more people dump their dismal fund, then? Because, the commission says, its just too confusing, with too many super product options (40,000 and counting) and information that workers just don’t understand. 

And yet, checking whether your savings are in one of these underperforming funds is relatively simple.

Every super fund issues its members with an annual statement that sets out their balance, a summary of the fund’s benefits (such as insurances) and the investment return achieved by the fund over a 12-month period. You can compare the results on your statement with the returns achieved by other funds by looking at a comparison site such as Canstar, or by checking individual funds’ returns that are published on their websites. 

There are also two well-known super research consultancies – Chant West and SuperRatings – that publish regular updates on super fund performance, as well as issuing broader ratings that take into account funds; fees and benefits as well as investment returns.

When considering fund investment performance, however, there are a few things to keep in mind:

1. Every fund will have better years and worse years so judging your fund on the basis of a single year isn’t particularly useful. Instead, look at its performance over five years and, if looking further back, don’t forget that 10-year returns are still feeling the tail end of the global financial crisis. 
2. The return you receive may not match the returns that comparison sites or performance charts show for your fund provider. That’s because the performance charts usually report the performance of a particular type of fund – almost always either a growth or a balanced fund – that you may not be invested in, or you may have selected some specific investment options that impact your returns.
3. Also, make sure you understand the formula a comparison site has used to come up with the investment returns it cites, because some sites show returns after certain fees and other costs, while others report a gross return figure. If possible, compare your net return against other net returns for the most accurate representation of what you’re actually receiving.
4. When comparing your fund’s performance against that of other funds, make sure you’re comparing like-for-like not only in terms of the assets the funds are invested in but also the period being measured (calendar year or financial year, for example). 
5. The Australian Securities and Investments Commission’s MoneySmart site has a handy little super comparison worksheet (at the bottom of this webpage)  you can download that will help you dig through any extraneous information to nail down the actual performance you’re receiving.

Do you regularly monitor your super fund’s performance? Have you switched to a better-performing fund?

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.