This is one of a series of blogs aimed at raising awareness of the everyday external reality we take for granted (the matrix) and then considering how well it really works for our collective well-being, both short and long-term. This week the lens is focussed on Superannuation.
Should we save up for our retirement? Back in the mid-90s Paul Keating decided on our behalf that we should, because projected tax revenues would not be sufficient to fund pensions for the huge numbers of baby boomers approaching retirement age.
Thus launched an industry, drawing most people (including me) into the illusion that it was primarily for our ultimate benefit. There’s one born every minute and I was sure one of them! I find investment management, interest rates, the stock market and similar gambling pursuits to be about as exciting as root canal therapy. So I duly paid out the required amount every year to a large retail fund and got on with life. Now that I’m eligible to take a lump sum I find that it’s significantly less than the sum of the contributions I made. I would have been better off putting cash under my mattress than paying into the super fund!
There are currently a number of action groups attempting to garner public persuasion in order to change the law to allow an opt-out from mandatory contributions, but here’s the kicker… Initial financial discussions determined that the Australian economy would be at risk if citizens were allowed to immediately access and withdraw superannuation.
Ah-ha! The matrix is exposed. The implication is that Superannuation Funds exist to maintain the economy – not for your benefit. If such action would put the economy at risk then surely that confirms a general belief that our money would be better employed elsewhere.
In fact if you are in a retail fund it is quite likely that your money would have been better off over the last 14 years in a bank savings account.
“Over the 14 financial years from June 1996 to June 2010, retail funds averaged a return of 3.66% pa. It is instructive to note that no retail funds rank in the top half of the 130 fund dataset.”
Let me put it more simply – if your money is in a retail fund you’re being screwed!
This chart from the same report shows the bottom line on net returns.
Sample Retail Fund | 7 yr rate of return % | Ranking |
Perpetual* | 5.4 | 73/130 |
MLC/NAB/Plum* | 4.9 | 90/130 |
State Super Retirement Fund | 4.8 | 95/130 |
Macquarie* | 4.7 | 100/130 |
ASGARD* | 4.5 | 105/130 |
BT/Westpac* | 4.4 | 109/130 |
CFS/Commonwealth* | 4.3 | 112/130 |
AMP* | 4.1 | 114/130 |
ING/ANZ* | 4.0 | 117/130 |
AXA* | 3.6 | 123/130 |
Suncorp Master Trust | 3.1 | 127/130 |
* indicates a family of funds
So why do retail funds perform so poorly compared to everything else? Interestingly the funds are not required to disclose what they make from fees or pay in bonuses.
The following chart shows that returns grow significantly with the size of the assets invested, which you would expect, due to market forces. It also compares “for profit” funds (FP) which includes retail funds, with “not for profit” funds (NFP) and shows that the retail funds return between 1.5% and 3% less than NFP funds.
So why do retail funds perform so poorly compared to everything else? Interestingly the funds are not required to disclose what they make from fees or pay in bonuses.
The following chart shows that returns grow significantly with the size of the assets invested, which you would expect, due to market forces. It also compares “for profit” funds (FP) which includes retail funds, with “not for profit” funds (NFP) and shows that the retail funds return between 1.5% and 3% less than NFP funds.
That margin on one $25 billion fund yields an additional $750 million per year that does not go towards investors’ retirements. So who is really benefitting from compulsory superannuation?
Over 40 years, $100 invested with a public sector fund would be worth $1150. The same $100 invested in a retail fund would be worth only $421.
Retail Funds are screwing you! If your money is in a retail fund, I hope that it is not part of your retirement plans…
Now we are fully entitled to be ripped off by any scheme we choose – that’s our right as citizens – the problem is that with mandatory superannuation there is no choice. It’s compulsory to be part of the matrix.
The real choice is obvious – root canal therapy is preferable to retail funds! Thanks Mr Keating for forcing us to fund organisations that grow the economy and ensure their own futures!
Oh, and welcome to the matrix!
What’s your experience?
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