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Ignorance and apathy scramble nest egg

AUSTRALIANS are losing millions of dollars on super each year out of sheer apathy, according to the research company Canstar Cannex.

AUSTRALIANS are losing millions of dollars on super each year out of sheer apathy, according to the research company Canstar Cannex.

It says fees on multiple accounts, a tick-the-box attitude to super by younger workers and ignorance of how much super is costing and the potential benefits are all eating into future retirement benefits.

While the super industry has made some inroads into getting consumers to consolidate their super accounts, the head of wealth management at Canstar Cannex, Steve Mitchell, said paying duplicate fees was still a big issue for consumers, particularly for younger people who have moved from job to job.

"If you take a young person who has had three part-time jobs while they're going to uni and who then goes into a full-time job they'll probably have three or four super accounts," he said.

"No one says: 'This is how to work out a plan for your super and which fund is best.' They just go into the employer's default fund."

Canstar Cannex has rated 81 super funds that are publicly available without the need to belong to an association, work for a particular employer or pay for financial advice and given 12 of those funds a five-star rating.

Funds have been rated for different profiles of consumers ranging from younger people with low account balances who basically just want to get a good deal at low cost, to consumers nearing retirement who place higher importance on features such as the ability to take out a transition to retirement pension and to accept spouse contributions.

Mr Mitchell said funds were rated on their pricing and features including insurance cover and costs. Investment performance was not a key criterion, though funds were marked down if they had been in the bottom quartile of funds over the past one-, three- and five-year periods.

The five-star performers included funds from the industry and the retail fund sectors, though Mr Mitchell said retail funds were more likely to be attractive to older consumers who wanted advice and features than to younger investors.

While unnecessary costs could be a problem for all investors, he said they were particularly damaging to people with low super balances. He said someone receiving $40 in compulsory super each month could lose 10 per cent of that by paying a relatively modest $4 monthly membership fee.

If they had several accounts, much of their savings could be eaten away by fees and compulsory insurance premiums.

While proposed government reforms are intended to make super simpler and cheaper for apathetic consumers, Mr Mitchell said at the very least investors needed to ask basic questions such as whether they were in the right fund for their needs and getting value for money.


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