The super performance gap that could cost you $200,000 at retirement time

Australians could be shortchanging their savings balances to the tune of hundreds of thousands come retirement time, at least that’s according to Industry Super Australia (ISA) - the representative body of industry super funds across the country.

A new analysis by ISA of data recently released by the Australian Prudential Regulation Authority (APRA) revealed an increasing gap in the performance between industry super funds and retail superannuation.

Industry super funds consistently outperformed their bank-owned counterparts, with a rate of return 2.89% higher over one year, 2.44% over three years and 2.13% over five years.

David Whiteley, Chief Executive of Industry Super, suggested that the increasing gap was “alarming” for Aussies who have placed their retirement savings into a bank-owned super fund.

“It is well known that not-for-profit industry super funds dominate the performance league tables. Less known is the apparent widening performance gap between industry and retail super funds,” he said.

In fact, Industry Super Australia predicted that a 2% difference in the rate of return over the course of an average Australians working life could mean a shortfall of around $200,000 for those with lower-performing super funds by the time they retire.

The calculations were based on a 27 year old with a starting balance of $0 in their super account earning $80,000 for the remainder of their working life until they retire at the age of 67.

Mr Whiteley suggested that the ongoing gap in performance between Industry SuperFunds and retail super also raised some serious questions for policy makers and governments, who are likely to pick up the tab for any retirement savings shortfall in the form of pensions.

“This is a concern for regulators monitoring the system; governments footing pension bills; and, most importantly, Australians saving for their retirement.”

“Policy-makers serious about strengthening the retirement income system, must look at cross-selling, profit flows and performance within vertically-integrated financial institutions.”

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