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Poor Gen Y. They’re either being accused of being too feckless and lazy, of not working hard enough, of not saving enough, or not moving out of their parental home fast enough. Now another survey is showing them up for not paying enough attention to their super.
According to a survey by REST Industry Super, one of Australia’s largest super funds, 54% of Gen Y respondents let their employer choose their super fund. On top of that, 37% had no idea how much money had accumulated in super.
REST chief executive officer Damian Hill said, “Eighty per cent don’t know the fees they are being charged, and eight in 10 have no idea how their super is invested.”
“These are both areas that younger people can make super work a lot harder for them.”
To add insult to injury, it seems just 30% of Gen Y respondents actually read their annual statements, and 36% don’t even bother to open the letter from their super fund.
While super and retirement generally aren’t top of the list of Fun Things To Think About in your twenties, they are worth sorting out if you want a comfortable life in your ‘twilight’ years.
The Association of Superannuation Funds of Australia’s chief executive officer, Pauline Vamos, said, “It’s really important, however, that Gen Y think now about the sort of life they want to live in retirement and the income they will need to sustain that lifestyle.”
“Engaging with your super early in life could mean the difference in retirement between overseas holidays and camping trips, bottled wine and cask wine or owning a car and catching the bus, in retirement.
“Once you know how much income you need, you can plan how you are going to achieve it and with the power of compound interest, the earlier you start, the more likely you are to achieve your goal.”
Choosing the right super fund
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So, how do you choose the right super fund? First off, if you have more than one super fund, you may want to consider consolidating funds to save money on fees. Then you need to choose the right super fund to consolidate those funds into.
According the research by the Rainmaker Group’s Selecting Super, each super fund performs differently, and choosing an underperforming super could cost have cost your nest egg $30,000 over the past five years alone.
The research showed that the average super fund returned 16.6% last year, after fees and taxes. The best performing fund – ARC MT Corporate – returned 21.1% last year, while AMP’s Simple Super and Tailored Super products returned just 3%.
Research showed that if you had $50,000 in your super fund five years ago, and made no extra contributions, that $50,000 would now be worth $76,000 (an average 8.8% annual return after fees and taxes).
Now, if that same $50,000 was placed in VISSF, the best performing fund of the past five years, offering an average annual return after fees and taxes of 11.3%, your $50,000 would now be worth $85,000.
However, if your $50,000 was placed in MTAA Super, the worst performing fund, offering an average annual return of 2.3%, that $50,000 would have only grown to a measly $56,000.
The executive research director at Rainmaker Group, Alex Dunnin said, “Super savers should be careful because there is such a thing as a dud fund – a fund that performs below average consistently over time.”
“While you can’t predict next year’s returns, it’s actually surprising easy to pick which will be the top returning funds,” Dunnin said.
“It’s like football. There are certain teams that you do expect to be near – if not at the top – of the league each year, while there are some teams you know will always seem to struggle.”
No more excuses, Gen Y. You have a football analogy to help you now, it’s time to get that super sorted.
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