Industry super funds outperform retail funds over the long-term
Differing investment philosophies and strategy to blame.
New research has revealed Australia's retirement savings pool would have been $105 billion better off if retail funds matched industry fund returns over the last two decades.
An analysis of Australian Prudential Regulatory Authority (APRA) and SuperRatings data by Industry Super Australia (ISA) found that over a 19-year period Australia's total superannuation savings would have been 5% higher if bank-owned and retail fund returns were the same as those dispersed by not-for-profit funds.
For example, someone with a starting balance of $20,000 could have been $36,000 better off.
The analysis identified two key attributes that set industry funds apart from retail funds.
The first is a sound investment philosophy. Industry funds pursue a long-term investment in the real economy, with more than $20 billion currently producing stable returns.
The second is fund structure and governance. Bank-owned funds pay above-market rates for services provided but aren't always passing on scale benefits to its members.
ISA CEO David Whiteley said underperformance of retail funds hurts the Australian economy.
"Bank-owned and retail super funds are a drag on Australia's retirement incomes and national savings," he said.
The analysis forms part of ISA's submission to the Productivity Commission's review of superannuation.
Eight million Aussies don't actively select their own super fund, instead relying on default super accounts.
If you're looking to switch funds, consolidate your super, better manage your self-employed savings or take out income protection for your nest egg, it's best to compare options and make the right decision.