Need to know
- The ATO's super fund comparison tool has had more than one million visits
- There's evidence the tool is helping people leave underperforming funds
- Super Consumers Australia says the tool must be expanded to include choice products to make it even more useful
Last year, the government introduced the ATO's new super fund comparison tool.
According to Super Consumer Australia director Xavier O'Halloran, the tool is a breakthrough for fund members. "Its real benefit is highlighting those [funds] that passed their basic fitness," he says.
The tool lets you compare the fees and seven-year performance of MySuper products.
The tool has recorded more than one million hits. And there is evidence it's having a real impact on underperforming funds – in late 2021, the Australian Prudential Regulation Authority (APRA) reported that seven percent of people in an underperforming fund had closed their account.
This number may sound low, but Super Consumers Australia's analysis shows that this closure rate is more than double that of the same period the previous year.
Your experience of using the tool
CHOICE member Megan found the tool "relatively easy" to navigate when she used it to compare the performance of her current and previous funds.
"I did use it over other comparison tools because I trusted it more coming from a government source, and I didn't want to spend too much time on it," she says. "I wanted a quick answer from a trusted source."
On the CHOICE community forum, user Peterchu says the tool was useful when he helped two younger family members select their first fund.
The tool "worked well", according to CHOICE reader Lena. "Visually, it wasn't very interesting, but I found the fund I'm in and was relieved to find it rated pretty well," Lena says. "It was easy to use overall."
What being in an underperforming fund means for you
It may seem that many super funds have roughly the same level of long-term performance, but research shows these differences can add up. APRA calculated that the difference between being in an outperforming MySuper product and an underperforming one was $11,387, or 12.6% over seven years.
APRA calculated that the difference between being in an outperforming MySuper product and an underperforming one was $11,387, or 12.6% over seven years
APRA also made clear that high fees mean you retire with less. The regulator calculated that the difference between the median administration fees paid by a fund member in the highest fee choice products is $284 a year higher than for other products. It's important to remember that higher fees don't mean you're getting a better product.
Moving your super to a better performing fund could see you enjoy more retirement income without having to work longer or go without during your working life.
The view from the regulator
APRA says the fund comparison tool is the best place to start for members looking to make informed decisions about their super.
APRA member Margaret Cole (who heads superannuation at the regulator) recently said that, since the introduction of the performance test (which is part of the tool), "there has been heightened scrutiny on investment returns, fees and costs across the industry".
Cole says this scrutiny will only become more intense. "Passing the performance test does not necessarily mean you are in clear water and have escaped the APRA radar," she says.
In a statement about the comparison tool, the regulator explained: "Increased transparency is a powerful tool for regulators to bring about improvements in superannuation fund performance, but members should never forget they also have the power to make decisions that will better secure their future in retirement."
There is less consumer scrutiny of choice super products, which, as of June 2020, made up almost half (46%) of APRA-regulated super products.
The fund comparison tool currently only lists MySuper products – it doesn't let you compare choice products. These are super products you can't be defaulted into – you have to make an active choice to join them.
Jane Hume, Minister for Superannuation, has confirmed that the government intends to extend the tool to include choice products. It isn't clear when this extension will go ahead.
Strong support for inclusion of choice funds
CHOICE member Ashley says including these products would be beneficial. "I found it wasn't really granular enough to be useful – for instance [my specific product] just isn't listed. If I was sticking to a core investment strategy, then it might be useful, but in my case, not really."
Jodi, another CHOICE member, thinks the tool has potential. "It looked pretty easy to compare fees and performance," he says. However, he couldn't compare his product, as he is in a different option from the balanced MySuper product for his fund.
CHOICE community member Peterchu also found the tool didn't include his super product, as it's not part of the MySuper system.
Extending the fund comparison tool would ultimately help more Australians find a better product or have peace of mind that they're in a product that is doing wellFranco Morelli, Super Consumers Australia policy manager
Super Consumers Australia policy manager Franco Morelli says the government should fund an extension of the comparison tool.
"People are using the tool, and it's already getting results in increasing the number of people exiting poor funds," he says.
"We need more transparency across the super sector. Extending the fund comparison tool would ultimately help more Australians find a better product or have peace of mind that they're in a product that is doing well in building up their retirement income."
Time for effective product information for all super products
Super funds that offer MySuper products are required to display a 'dashboard' on their website with information on how the product is performing and its fees.
But choice products dashboards have been delayed for nearly a decade by successive governments. There are now proposals to push back new dashboard requirements to 2027.
'Overwhelming and complex'
As we covered previously, experts say these dashboards weren't encouraging fund switching. The dashboards are often difficult to find, and the different formats and ways of displaying information make comparisons complex.
A 2020 study by a group of academics found that the dashboards weren't useful in helping people compare fund performance. Similarly, the Productivity Commission found the information presented by funds was often "overwhelming and complex", and that most dashboards weren't effective.
Clearer, simpler and more widely applied product dashboards are needed to help members compare the returns, fees and risks associated with all super productsProductivity Commission
"Clearer, simpler and more widely applied product dashboards are needed to help members compare the returns, fees and risks associated with all super products," the Commission says.
Government action needed
Morelli agrees that the government needs to take steps to make sure consumers have the information to compare funds and make good decisions.
"First, we need to ensure the fund comparison tool includes choice products this year," says Morelli. "This needs to be a priority.
"Second, it's time to review and consumer-test the information people need to ensure it's salient, simple and accessible. Useful product information covering both MySuper and choice products, harmonised with the comparison tool, would greatly help members get the most out of their super."
This content was produced by Super Consumers Australia which is an independent, nonprofit consumer organisation partnering with CHOICE to advance and protect the interests of people in the Australian superannuation system.
Stock images: Getty, unless otherwise stated.