Underperforming bank owned funds draining Aussie retirement savings, says APRA

By Kirsty Timsans ·

Aussie retirement savings are being drained by underperforming bank owned super funds, after new data by the Australian Prudential Regulation Authority (APRA) revealed that average annual returns to industry super funds in the not for profit sector have been higher compared to bank owned super funds over the past 11 years.

According to APRA, the average annual net rates of return for industry super funds from 2004 to 2014 was 8.23% compared to bank owned super funds at 6.03% - an outperformance of 2.2%.

“This 2.2% gap is a real concern. The bank owned super funds are persistent underperformers in our system. They are a drag on member returns and national savings,” said David Whiteley, CEO of Industry Super Australia.

APRA found that a bank owned fund member with a super balance of $50,000 in 2003 would have accumulated just $154,000 by June 2014, whereas if they had invested their money in an industry super fund over the same period they would have accrued $180,000 - a difference of $26,000.

“For most Australian households, superannuation represents the largest component of wealth outside the family home and differences in performance, even small differences, have a significant impact on accumulated retirement savings over time,” said Whiteley.

It was warned that consistent underperformance by bank owned funds’ can act as a handbrake on the economy by preventing a deeper capital base and higher productivity.

Whiteley reminded that the objective of Australia’s super system is to “maximise retirement savings of as many people as possible, and all evidence indicates industry super funds are fulfilling this purpose, driven by the ethos of delivering all profits to members.”