If you’re guilty of ignoring your superannuation statements or struggle to remember the name of your super fund, you’re not alone. In fact, you may be among the eight out of 10 Australians who don’t choose their own super fund.
Industry Superannuation Australia chief executive David Whiteley says an estimated 80 per cent of Aussie workers are disengaged with their superannuation affairs, they let their employers choose their fund.
“It’s human nature to focus more on the immediate than on the long-term, so when it comes to people’s financial affairs they obviously spend more time saving for a holiday, paying off their mortgages or making sure they can pay for their kids’ education,” he says.
“These are much bigger priorities than planning for retirement which could be 20 to 30 years away.
“That lends itself to people not paying attention to where their superannuation contributions are being paid into.”
Aussies typically start to pay attention to their superannuation balance when they’re approaching retirement. But it may be a case of too little, too late, says Mr Whiteley.
“A discussion about superannuation with someone in their 20s, 30s or even 40s can often be quite conceptual,” he says.
“But a discussion with someone in their 50s or 60s about working longer to top up their super can be quite confronting.
“What it means is either someone retires with less, they have to contribute more later in life to catch up or they simply work longer.”
Industry superannuation funds commonly outperform bank owned funds and deliver more into members’ retirement savings, says Mr Whiteley.
“All the evidence proves that industry super funds over the long term as a sector have outperformed the bank owned super funds,” he says.
“Industry super funds return all profits to members, they tend to invest more in infrastructure and unlisted property and that delivers returns, and of course, industry super funds never pay kickbacks to financial planners.”
The difference may only add up to 1 to 2 per cent per year, but with compounding interest this could add up to thousands of dollars by retirement age.
To avoid the prospect of working longer later in life, Mr Whiteley recommends keeping a close eye on your super fund and comparing its performance with others.
“The most important thing someone should be doing is trying to compare the performance of the fund – the long-term performance not the short-term performance,” he says.
“They can do this by reviewing league tables, contacting their super fund to find out information about its relative performance or of course, seeing a financial advisor.”
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