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Major super funds have been joyously announcing their annual returns for 2022-23, with five big funds last week announcing returns of between 8 and 10 per cent.
As they do so, it provides an important opportunity for you to stop and take stock of your own superannuation, especially if you’re looking to retire in the next 10 to 15 years. After all, if your fund can’t make an average return for a fair fee in one of the sexier years of super, should you really be sticking around?
If your fund can’t make an average return for a fair fee in one of the sexier years of super, should you really be sticking around?Credit: Simon Letch
Superannuation exists to give you a compounding investment return over a long period of time. The more you whack in earlier in life, the more time can work in your favour. The average return of between 7 and 10 per cent per annum will see your superannuation balance double in capital value every seven to 10 years, and this explodes if you contribute actively.
Today I’m going to teach you how to read between the numbers of these annual returns announcements. And once you’ve learnt the three simple lessons, I’ll show you how to benchmark your fund’s performance using the numbers from some of Australia’s largest funds.
How did your super fund perform in 2022-2023?
The S&P/ASX 200 ended the financial year up 9.2 per cent, and with most balanced and growth funds invested broadly in Australian shares, it makes sense that 2022-23 returns will be similar.
What nobody is talking about is that in the same year, inflation was running close to 7 per cent, so most funds are only just ahead in real terms. Given this, while it’s important to understand the topline performance of your fund in 2022-23, take it lightly. This is the least important number.
How did your super fund perform over the last eight years?
Funds market themselves with whichever statistic makes them look good. Currently, they’re using 10-year returns in their marketing. For most, these look good because 2013, 2014 and 2015 were good years.
But the ATO comparison website, YourSuper, benchmarks all funds over an eight-year period uniformly, so you can see how they’ve performed with the same parameters. So take the time to look up your fund and become familiar with its eight-year performance. Don’t compare advertised percentages or eight-year averages with 10-year averages. Only compare apples with apples.
How much did your fund charge you to manage your super?
Every superannuation fund charges fees, and they come with a range of different names. The most important thing you need to understand is what your annual fees are (in total) and then what they are as a percentage of the balance in your fund.
To calculate, take the total amount of fees charged on your statement. Then divide this number by the total balance of your fund, then multiply the total amount by 100. That is your annual fee as a percentage of your total balance.
It’s important to care about this number because if you pay too much in fees, you can erode a lot of the benefits of compound investment. YourSuper benchmarks the fees charged by all super funds, allowing you to see whether your fund is competitive for the size of the balance you hold.
So now, let’s turn those benchmarks into real insights in light of what the super funds announced last week.
Australian Retirement Trust, which has 2.2 million members, reported annual returns of 10 per cent in their default fund. This fund advertises an annual average of 8.6 per cent returns over 10 years and reported a return of 9 per cent in 2021-22 – a much tougher year for funds.
On YourSuper, the eight-year net return on this fund is 6.62 per cent on a super balance of $100,000. And the fees are $1052, or 1.05 per cent of the $100,000 balance.
HESTA announced a headline return of 9.59 per cent on their Balanced Growth fund, the default option most of their members invest in. It promotes a 10-year return of 8.02 per cent, and has an eight-year net return of 6.54 per cent and fees of 1 per cent on a balance of $100,000 on YourSuper.
And AustralianSuper, the country’s largest superannuation fund, saw its default fund return 8.2 per cent in 2022-23, a good recovery from the negative returns of 2.97 per cent in 2021-22. On YourSuper the eight-year net return for this fund is 7.2 per cent and for a balance of $100,000, you’ll pay fees of $839 or 0.84 per cent of your balance. Not bad!
Looking closely, these funds are all doing a good job for their members. But according to super regulator Australian Prudential Regulation Authority, one in five funds are not. So take the time to add up your fund’s numbers and compare them to the biggest, highest performing and most popular funds in this country. You should do it every year in your quest for a comfortable retirement.
Bec Wilson is the author of How to Have an Epic Retirement (now available for preorder) and writes a weekly newsletter for pre- and post-retirees at epicretirement.net.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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