Millions of Australians have been advised to relocate their money to other superannuation accounts after the five poorest performing funds in the nation were made public.
When 69 funds were tested by the Australian Prudential Regulation Authority (APRA) against the industry standard, five of them underperformed, and four of them failed the test twice.
Retirement Wrap from Westpac Group, Retirement Wrap from BT Super, Balanced MySuper from Energy Industries Superannuation Scheme, Australian Catholic Superannuation & Retirement Fund from Lifetime One, and AMG Super made up the bottom five.
The five worst retirement funds
1. The Retirement Wrap for Westpac Group
2. BT Super’s Retirement Wrap (also Westpac-owned) (also Westpac-owned)
3. Balanced Energy Industries Superannuation Scheme MySuper
4. The Australian Catholic Superannuation and Retirement Fund of Lifetime One
AMG Super 5.
The regulator compared the findings to MySuper, which is the default choice for anyone who don’t choose a particular superannuation fund like Rest, Hostplus, or AwareSuper, by taking into account each fund’s charges, fees, and performance over the previous five years.
Four of the super funds, according to APRA, failed the test a second time and will be prohibited from accepting any new clients.
The regulator said in a statement that “the four items that failed the test for a second time are now closed to new members.”
Three of the four goods were provided by trustees who intended to leave the market.
The deadline for these three funds to advise their clients to transfer their investments elsewhere is September 28.
Retirement Wrap from Westpac Group failed for the first time, while the remaining four also failed—some of them twice in as many years.
The 500,000 Australians whose superannuation is now held in one of the three funds are encouraged to transfer their assets, and they may get help doing so, to MySuper.
The majority of people invest their retirement earnings in MySuper products, which are the default options provided by super funds.
Super of typical Australians by tax bracket
SUPERANNUATION BALANCE ON MEDIUM: $145,388
$143,479 IF $18,200 OR LESS
$18,201 TO $37,000: $92,490
$37,001 TO $90,000: $116,698
$90,001 TO $180,000: $249,830
$575,470 FOR OVER $180,000
NOT RETURNING TAXES: $99468
Figures from the Australian Taxation Office for 2019–20
Martin Fahey, CEO of the Association of Superannuation Funds of Australia (ASFA), noted that APRA-elected funds, which had an overall improvement in the most recent performance test, were held by three-quarters of the population.
In the end, Australians got greater returns on their super, according to Mr. Fahey, who told 7News that frequent performance assessments weeded out the funds that weren’t performing.
In all, 44,000 funds had their first failure and 559,000 accounts saw their second failure.
The findings, according to Mr. Fahey, were distorted by the fact that the Westpac-owned BT Superfund had failed twice.
We have a single, very large fund, called BT, which, according to him, was responsible for a sizable number of accounts.
The statistics are even more astonishing than they already are if you isolate that.
The super performance test was passed by 13 million member accounts.
It comes just after fresh tax office statistics indicated the average Australian had only $145,388 in savings, well short of what is needed to support retirement.
This falls well short of the $535,000 that the Association of Superannuation Funds of Australia (AFSA) recommends for retirees who are 67 years old.
Only a small percentage of the richest Australians, those making more than $180,000 per year, had enough retirement savings; those on middle-class and ordinary wages fell well short.
It happens in the midst of a heated national discussion on how much money Australians need to retire.
According to new Australian Taxation Office data, the average worker had a balance of $145,388 in the 2019–20 fiscal year.
Men had an average balance of $161,834 while women had an average balance of $129,506.
Both numbers fall well short of the $535,000 ASFA advises as a reasonable retirement savings target for homeowners receiving the elderly pension at age 67, which is $164,000 saved up by age 40.
Workers in the highest tax band, who make over $180,000 annually, had average superannuation balances of $575,470, the only group exceeding ASFA’s retirement guideline.
In the $37,000 to $90,000 tax band, middle-class and somewhat below-average income individuals had average super balances of $116,698.
This covered the average taxable salary of $63,882 for full-time and part-time workers, with men earning $74,559 and women $52,798.
Average full-time employees earning $90,917 were among those in the $90,000 to $180,000 income range, and they had average retirement savings of $249,830.