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Super funds prove less than wonderful

Hundreds of thousands of superannuation investors would have been better off putting their money in the bank, internal industry figures have revealed.

Hundreds of thousands of superannuation investors would have been better off putting their money in the bank, internal industry figures have revealed.

HUNDREDS of thousands of superannuation investors would have been better off forgoing the government's tax breaks on contributions and putting their money in the bank, internal industry figures have revealed.

In many cases, the value of savings in super funds has failed even to keep pace with inflation, effectively losing more than $100 billion in purchasing power over the past five years.

Documents prepared by industry analysts SuperRatings and obtained by The Sunday Age, rank the best and worst super funds based on a seven-year period, exposing those that have failed most spectacularly to preserve the spending power of members' savings. Among the worst performers were some of the top banks and insurers, including Westpac investment arm BT, the Commonwealth Bank's Colonial First State, and AXA, one of the nation's largest insurance companies.

The historically dire returns could not have come at a worse time, with the number of people hitting retirement age set to increase by 33 per cent between now and 2014, as baby boomers near the end of their careers.

Tens of thousands of people have been forced to postpone their retirement or make alternative plans for life after work.

The documents show the best performers were the industry funds, which do not pay commissions to financial planners, so their costs are lower. The top industry funds had returns averaging 6 per cent a year over the past seven years, despite the global financial crisis.

At the top of the performance tables, based on its seven-year results, is the OSF Super Mix 70 fund, set up for bank workers. At the base is BT, manager of the fund ranked lowest over the same period in the ''balanced fund'' sector, which accounts for 80 per cent of the nation's $1.3 trillion super savings.

The giant fund manager's BT Lifetime Super (Employers' Plan) has made just 1.5 per cent a year - half the annual rate of inflation of 2.93 per cent a year over the seven years. This equates to compounded losses of 9.6 per cent after inflation is factored in.

Also at the bottom of the rankings is AXA. Its SD Business super fund has returned 2.13 per cent a year over the same period. Another BT/Westpac fund, the BT Bus Super - described by the company as a ''deluxe fund'' for super savers - is ranked 40th out of the 43 funds in the sector.

Commonwealth Bank's Colonial First State is ranked 36th, just hitting the 3 per cent annual return mark, meaning it has produced virtually no growth in real terms over seven years.

Australia's balanced superannuation funds have a performance target of inflation plus 3 per cent a year. But the worst performers fall well short, despite charging some of the highest management fees in the industry, often exceeding 2 per cent a year.

Federal Assistant Treasurer Bill Shorten defended super as a long-term ''solid investment'', but criticised expensive retail funds managed by banks and insurers. ''Regardless of the overall return metrics, not-for-profit funds have consistently outperformed for-profit funds by around 2 percentage points a year,'' he said.

Jeff Bresnahan, of SuperRatings, said the global financial crisis meant results for the past few years were skewed. ''Over the longer term, investors have done very well in super,'' he said. Since 1992 the median balanced fund had averaged returns of 6 per cent a year.


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