Australia’s superannuation system (ie where all our retirement money and 9.5% of our wages go to) is in the firing line.
The Productivity Commission released a report into the $2 trillion system called “Superannuation: Assessing Efficiency and Competitiveness“.
Its overview is this:
“Australia’s super system needs to adapt to better meet the needs of a modern workforce and a growing pool of retirees. Currently, structural flaws — unintended multiple accounts and entrenched underperformers — harm a significant number of members, and regressively so.“
In other words, the system is not working. It believes an improved super system would give $3.9 billion back to members each year.
The big problems:
- Customers (ie you) do not have access to enough information to compare your options when choosing a super fund.
- Funds are underperforming. Staying with an underperforming fund could cost you hundreds of thousands of dollars in retirement. High fees and excess insurance costs make this worse.
- There are 10 million unintentional duplicate accounts costing billions.
- The default system (where your employer allocates you a fund) is potentially harmful.
What does this mean for me?
The commission provides recommendations. It is unlikely all will be adopted as to come into effect several political hoops need to be jumped through which is a long process. Changes could start to happen by 2020.
The main points being considered are:
- Creating a “best in show” list of the top 10 performing superannuation funds for Australians to choose from.
- A new way to allocate default funds which would only be allocated once eliminating multiple super accounts.
What can I do now to get my share of that $3.9 billion?
Here are our tips to increase the amount of money in your balance at and during retirement:
- Know where your super is (have one account and consolidate if if you have more than one)
- Understand what fees and charges you are paying (A $20 fee this month can cost us big time in retirement)
- Check the performance of your fund and compare to others.
Disclaimer: This article has been prepared for informational purposes only. The information in this article is general in nature and has not been prepared with your personal circumstances in mind, so please consider if any advice is appropriate to you before making any financial or taxation decisions.
Money Place AFSL Ltd ACN 601 061 438 holds Australian Financial Services Licence 466327 and Australian Credit Licence 466327.