This Article with written by Anthony Keane on 20th October 2022

Super funds that have failed performance tests are costing Australians hundreds of millions of dollars a year, yet their members are refusing to switch.

A new analysis by Industry Super Australia has found 850,000 people who remained with dud MySuper products have lost a combined $1.6 billion in 12 months by failing to change to a top 10 fund such as Hostplus, AustralianSuper or Australian Retirement Trust.

This equates to an average $1900 per person, Industry Super Australia found. If a typical worker remained with the poor-performing fund for 10 years they would be $25,000 worse off, while a 30-year-old stapled to a bad fund for the rest of their career could be $225,000 worse off at retirement, it found.

Performance testing by financial services regulator APRA in 2021 failed 14 MySuper products, forcing them to contact their members and encourage them to change funds.

However, only 10 per cent of members switched, and Industry Super Australia chief executive Bernie Dean said many people did not think about switching “until it’s too late”.

“We are quite worried that there are hundreds of thousands of Australians who might be sitting in these underperforming funds, languishing with high fees and poor returns,” he said.

APRA failed five out of 69 MySuper products tested in 2022, including four repeat offenders that are now banned from taking on new members, but existing members who do not switch could remain with them indefinitely.

“This is a reminder that there is a huge cost to doing nothing if you are in a dud super fund,” Mr Dean said.

“Lots of people don’t know you can be stapled to a super fund that has failed the government’s performance test, and that could punch a huge hole in a person’s nest egg.

“It is up to the government to tighten consumer protections so people are only stapled to the best funds that have passed the performance tests.”

CreationWealth senior financial adviser Andrew Zbik said many people were “daunted” by super and unaware that they could switch.

“You have to make a choice, and most people who receive these letters do not have the knowledge of what to do or where to go,” he said. “If you have multiple super funds and one is underperforming, it’s a kick up the gluteus maximus to consolidate.”

Mr Zbik said there were flaws in ranking super funds by returns, because investment funds often rotated in and out of the top echelon of performers.

The Australian Taxation Office’s YourSuper comparison tool is based on eight-year net returns, providing a longer-term view.

Mr Dean said many people did not spend much time thinking about super, and might not realise their money was sitting in a dud fund.

“Some many think it’s too hard, but these days it’s very simple to compare and very simple to switch,” he said. “Just take a few moments to check where your super is and then compare how it’s performing against others.”