If you want to save thousands in annual fees and keep a handle on your super balance you should consolidate your super accounts, new research shows.

Actuarial firm Rice Warner has calculated that if all super fund members consolidated their multiple accounts, the average account balance of $67,700 as at June 2015 would rise by more than $46,000 to about $114,000, an increase of 68 per cent.

Approximately 18 million Australians control almost 30 million superannuation accounts. According to Rice Warner, the vast majority if these duplicate accounts are in pre-retirement phase. Because of this, the average pre-retirement account balance of $50,300 would rise to $89,900 – an increase of 79 per cent – if members consolidated.

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One of the main reasons for the high level of multiple accounts is the “widespread tendency” of employees to join default funds when they change jobs while holding on to existing membership, according to the Rice Warner report.

Industry super funds have been proactive in their efforts to encourage individuals to consolidate.

“One of the key issues is when younger people start a retail job, their super is paid into one default fund. When they shift to another job they start up another new fund,” said an industry spokesperson. “It’s not that difficult to end up with multiple funds.”

The table below shows how full consolidation of accounts would affect average member balances across different fund sectors.

Source: Rice Warner

Cutting duplicated fees and charges

By holding multiple accounts, super fund members pay billions of dollars in unnecessary fees annually.

According to the Australian Prudential Regulation Authority, super fund members paid $12.6 billion in fees last financial year, including more than $4 billion in insurance costs and $3.9 billion in administration charges.

For a member holding two accounts, each with a $10,000 balance, the potential fee savings from consolidation could be more than $2000 per year.

However, Australian Institute of Superannuation Trustees chief executive Tom Garcia said members should be careful when consolidating.

Many retirees are living below a “comfortable” level. Photo: Getty

“There are clear benefits from consolidation but members need to be careful about the implications for their insurance cover,” he said.

“As soon as you rollover your balance, the insurance is gone. Before any decisions are made about consolidating super accounts, members should contact the fund they are considering rolling into to discuss their insurance needs and compare offerings.”

Retirement gap remains wide

The Rice Warner figures also show that the account balances of a large percentage of Australians at retirement age are still well short of what is needed to sustain a “comfortable” lifestyle.

In the 60-64 age group, the average member balance was $212,000 in June 2015 against an average account balance of $165,000.

Contrast that figure with the $545,000 the Association of Superannuation Funds of Australia (ASFA) says a single 65-year-old, home-owning retiree would need for a “comfortable” standard of living, taking into account the age pension. Based on that estimate, the average member balance falls $333,000 short.

But Rice Warner warned that average balances can be misleading because of the existence of duplicate accounts. Its report said super funds with a more accurate assessment of how much money their members held across multiple accounts were better placed to “understand and educate” their clients.

The research highlights why governments, super funds and fund members need to look beyond bare statistics giving average account balances in order to properly confront the inadequacy of Australia’s retirement savings.

DISCLAIMER: The New Daily is owned by a group of industry super funds.