Super balance act gets wobbly

Your super is out of balance ... and it's worse than you think.

Think your super fund returns are bad? They’re probably even worse than they appear.

While superannuation balances have partially recovered in the past three years after the drubbing they took during the global financial meltdown in 2008, the retirement balances for most Australians are still in the red.

The bad news is that the numbers on those annual statements don’t take account of all the expenses, particularly life and disability insurances.

Around two thirds of all Australians rely on their super funds to provide them with life insurance. But the premiums are deducted after super returns are calculated. That explains why many super accounts that claim to have grown, show little or no growth at all while others have shrunk at a faster pace than initially appear.

“Insurance premiums can take between $500 and several thousand dollars from your super fund account each year, and if investment earnings are down it can result in a big proportion of your super contributions being eaten up,’’ says Alex Dunnin, from superannuation research group Rainmaker.

“The insurance might be good value but it still means it can gobble up your super fund if you don’t watch out for it,’’ he says.

During the past five years, the retirement nest eggs for most Australians went backwards with the industry losing on average 0.8%.

Those numbers are calculated after the massive fee grab by the industry, that last year alone totalled almost $18 billion. But the performance numbers don’t include the insurance premiums and that gives an inflated view of the balance.

“That’s why it’s often a good idea to put extra into your super if you have insurance, though most people don’t,” Dunnin says.

Australia’s national retirement savings scheme has long been depicted as a world beater. But the 20-year experiment is now showing signs of extreme stress, plagued by years of poor returns and revelations of fee gouging and conflicts of interest.

It has now become apparent that most Australians simply do not have enough superannuation to maintain a comfortable retirement.