Choosing the right super fund is a perennial debate.
CEO of the Association of Superannuation Funds of Australia (ASFA), Martin Fahy, spoke to TICKY on Tuesday on the choice facing consumers.
The royal commission has put a microscope on bank-owned, for-profit “retail funds” leading some commentators to recommend an influx into not-for-profit industry super funds.
In this interview, Your Money’s Ticky Fullerton asks the boss of ASFA (which represents both industry and retail super funds) about the difference between the two sectors.
“If you’re in a retail fund, wouldn’t you be keen to pull out and throw it into industry super?” Fullerton asks.
“I think its very important that people don’t see it as retail versus industry.
“What we need to do is for people to say, ‘Am I in the right fund?’
“If you’re in a fund and you think you’re paying high fees and you think you’re not getting the returns and it’s not right for you, then you should move.”
The Productivity Commission has said retail funds aren’t as good investment pickers as the industry funds, by about 190 basis points in terms of an under-performance gap.
Asked about the finding, Fahy says:
“The first thing to recognize is that the Productivity Commission has confirmed that Australian superannuation is working and generating returns.
“There’s no doubt they’ve highlighted we have some habitually under performing funds, and that fees do impact return.
“What we are seeing, and the Productivity Commission has said this, is that it’s difficult to make definitive statements about fund performance over a period of time, even as long as 10 years.
“Superannuation is a 45 year investment for most people.
“We need to be careful not to jump in and draw conclusions.
“There is no doubt though that high fees do erode long term return on investment.”