Research from new consumer group Super Consumers Australia shows that the superannuation system put over 170,000 people into a poor performing super product in 2017-18, costing them up to half a million dollars in retirement.
More than 176,000 new accounts were created in 2017-18 for MySuper products in the bottom 25% or "bottom quartile" of performers. These accounts join the more than one million total accounts already held in these bottom of the barrel MySuper products.
"These superannuation laggards continue to attract tens of thousands of new members each year through a badly designed default system. Our superannuation system is an "unlucky lottery" for too many Australians," says Super Consumers Australia Acting Director, Xavier O’Halloran.
"What’s worse is that we know the industry is resisting changes which would ensure people end up in better performing products."
"The Productivity Commission proposed a suite of options, including ‘best in show’, which would have the immediate effect of stopping more people’s retirement savings ending up with products that would cost them in retirement."
The Productivity Commission spent three years studying the efficiency of the superannuation system, concluding that there was:
- Chronic underperformance: MySuper products that underperformed in the medium term tended to underperform over the long term.
- That a person unlucky enough to be defaulted into one of these chronic underperformers would be $502,000 worse off by the time they retired.
"Our super system should default people into products that will leave them well off in retirement. It’s an embarrassment that over 170,000 people are ending up in poor performing products with funds like BT, Mine Super and WA Local Government Super."
"We need the regulators to take real action to weed out these laggards, but we acknowledge that this will take time.The regulators job will be made much easier if we stop growing underperforming products through a poorly designed default system," says Mr. O’Halloran.
The newly launched Super Consumers Australia is urging the Federal Government to take action on the Productivity Commission and Royal Commission reports, including:
Ending the creation of duplicate accounts
Ensuring people are only defaulted into the best performing products
Who are Super Consumers Australia?
Publicly launching today (25/09/2019), Super Consumers Australia a not-for-profit established to advance and protect the interests of superannuation consumers, with a focus on low and middle income earners. We are working to make the sector fairer and more accountable. During its start-up phase Super Consumers Australia is partnering with consumer advocate CHOICE, with plans to secure permanent funding to establish a stand-alone specialist voice for consumers in superannuation.
Director, Super Consumers Australia at CHOICE
0415 823 607