02.Best-performing super funds
Superannuation account returns have been on the rise after taking a beating at the hands of the GFC. Median balanced funds (in most cases the default option) posted a healthy 16%+ return for 2013 – a big improvement over the previous three years, when most accounts earned about 8.6% a year.
But that doesn’t mean your fund is in the winner’s column, especially if the fund manager has a conflict of interest problem – and there’s plenty of that going around. Recent revelations about super funds investing in the banks that own them instead of shopping around for the best return should serve as a cautionary message for people just starting to build their nest eggs.
The mismanagement has reportedly meant returns as low as 1.38%, well below the inflation rate. Add in high fees and your super account could really lose value over the long run.
Comparing super funds
- Look for good performance over a five-year period rather than exceptional performance for just a year or so. Superannuation is a long-term investment.
- Be sure to factor in taxes and fees when checking performance figures.
You should also only compare funds with similar investment strategies, or those with roughly the same mix of shares, fixed interest and cash. For Gen Y-ers, a fund focused on growth – with more exposure to the potentially higher gains of the sharemarket – is generally a good call. But talk to a trusted financial adviser to find the right pick for your situation, preferably one who has no commercial connection to any of the funds they recommend. And only agree to pay on a one-off, fee-for-service basis.
Comparing superannuation fees
As of December 2013, the 11 super funds below that are open to everyone had the lowest fees based on a $50,000 balance, averaging about $350 per year. Unless your mandatory super contributions are going to a fund that charges similar fees or to a MySuper account, you are probably paying significantly more.
It’s worth considering, though, that low-fee funds may offer less in the way of life, total and permanent disability (TPD) and income protection insurance, which are included in industry funds.
You also need to consider performance. Only one of the low-fee funds, AMIST Super, was a top 10 performer over the past five years for its balanced investment account (usually the default choice), averaging a 9.9% return per year.
So the trick is to find a fund with good returns and low fees, and make sure you’re not paying for something you don’t need. Super comparison websites such as Canstar Cannex and SelectingSuper can be useful tools for comparing funds, but be aware that such sites use different rating methods. Use them as a research tool, not a decision maker, and look for long-term solid performers.
||Annual fee based on a $50K balance
|ANZ Smart Choice Super
|Bendigo SmartStart Super
|First State Super
|Energy Industries Superannuation Scheme Super
|Club Plus Superannuation
|ING DIRECT Living Super
|Sunsuper for Life - Super-savings Account
|Asgard Infinity eWRAP Super Account