Don't stay if your super fund is a dud
Don't get mad, get involved. While the passing of the 12 per cent compulsory superannuation legislation this week generated the inevitable grumbling about super fund performance, the fact is that most of the grumblers have only one person to blame if they're feeling hard done by: themselves.
Don't get mad, get involved. While the passing of the 12 per cent compulsory superannuation legislation this week generated the inevitable grumbling about super fund performance, the fact is that most of the grumblers have only one person to blame if they're feeling hard done by: themselves.After more than a decade of compulsory contributions, super is now the second-biggest asset owned by most Australians after the family home. For non-home owners, it is paramount.But while we will spend weeks, and often months, selecting the right home to buy, negotiating a price and maintaining and improving this valuable asset, too often super merits only a passing glance - usually when the annual fund statement turns up.We'll begrudge spending a couple of hours checking that our super is being properly looked after.That might have been acceptable when your super was worth a just few hundred dollars (though, even then, you would put the time into choosing a good term deposit or online savings account) but it is downright negligent once your retirement savings are in the thousands, or tens of thousands, of dollars.Too often we hear comments such as: "Super, you can keep it. My fund hasn't done anything. I'd be better off if I'd got the money myself," without people having put any real effort into making their super work better.It's as if we think that because super is compulsory, we don't have any say in how it's managed. That's wrong. If your super fund isn't performing, it's highly likely you are one of the majority of fund members who have every right to change their arrangements. All that takes is a bit of time for research and filling in the necessary papers.About 80 per cent of fund members remain in their employer's default fund, the fund and investment option chosen as being most suitable for the bulk of fund members. Because this is usually a balanced fund, it means they are exposed to so-called "growth" investments such as shares. In the long term, these assets have historically provided better returns than more conservative investments such as bonds and cash but, as we've seen in recent years, they don't always live up to that "growth" promise. They can - and do - lose money. And although super funds can be justifiably criticised for not having paid enough attention to the potential downside of these investments, it's not super itself that is the problem.If you genuinely don't want to be exposed to the hazards of the sharemarket, talk to your fund about switching to a different investment option within the fund. Most funds have at least three or four basic options ranging from conservative to high growth. Your fund should be able to help identify which is best for you. Many funds have a wider range of options, allowing you to invest in things such as term deposits or direct shares as well as managed funds.Another misconception is that all super funds are much the same. Wrong again. As you would expect with thousands of funds on the market, there are good products, duds and a lot in between. If you're in a dud, why stay there? There are plenty of good funds in the market that would be only too happy to help you transfer your savings.Although you can't control whether investment markets will go up or down in the coming year, one thing you can control is costs. With super, even a 1 per cent difference in fees can make a huge difference to your retirement payout.If your fund charges more than 1 per cent a year, you might want to ask why. Is it offering extra services you value, or better performance? Or would you be better off switching to a cheaper fund?If you're thinking of switching, you'll need to make sure you won't lose benefits such as automatic insurance cover. But it's hard to argue you should stay with an expensive fund just for insurance.How has your fund performed in the past five years? If you're in a balanced fund, it's worth noting that, according to research centre SuperRatings, the median return for that kind of fund for the five years to June 30 was just less than 1 per cent but the best fund returned 3.5 per cent a year and the worst lost 2.8 per cent a year. If your fund returned less than the median, again, you would want to ask why.If you still loathe the idea of someone else managing your money, there's always the option of a self-managed super fund. You decide where your money is invested, you control the costs and extras such as insurance and you take responsibility if anything goes wrong. Of course, running your own fund is not as simple as setting up a bank account. There are legislated responsibilities for fund trustees and the Tax Office is charged with ensuring you fulfil them. But it is an option.Although compulsory super means we all have to save for retirement, it doesn't mean we have to passively accept what we're given. There are choices for members who want a better deal we just have to make them.It was enough to send shivers down the spine. I opened up an envelope containing a standard dividend statement to find I had received not one but two notices - the second for a self-managed super fund in Western Australia.Name, address, shareholder reference number - they were all there. But most disturbing was that I was now also in possession of the fund's full bank account details. Thanks, Computershare. If I was a scheming fraudster this would have been a message from heaven.To give the company its due, Computershare was fast to act. A spokesman says it has investigated and identified the issue (part of the manual letter-stuffing process), and is undertaking corrective action.In the meantime, I'm returning the extra statement to be sent to its rightful owner. All's well that ends well, but it highlights the dangers of lax security and one suspects this is not the only time such slip-ups have occurred.Twitter: @sampsonsmh