Su­per switch­ers end up worse off

Mercury (Hobart) - - BUSINESS - KARINA BAR­RY­MORE

SWITCH­ING s up­er­an­nu­a­tion funds is a waste of money and an ex­pen­sive mis­take with most peo­ple earn­ing lower re­turns and al­most half pay­ing higher fees, ac­cord­ing to a new re­port.

Ac­tu­ary Rice Warner found 56 per cent of su­per fund mem­bers who switched to a dif­fer­ent fund earned lower re­turns than they would have earned in their old fund. A fur­ther 49 per cent of “switch­ers” paid higher fees in their new fund.

In the first re­search of its kind, Rice Warner found of those peo­ple who switched funds in 2015, 72 per cent switched to a re­tail fund, 20 per cent switched to an in­dus­try fund and 6 per cent switched to a pub­lic sec­tor fund.

Over­all, switch­ers paid an ex­tra $137 mil­lion a year in fees and missed out on $284 mil­lion in in­vest­ment re­turns, com­pared with stay­ing put.

Rice Warner re­searchers Nathan Bonar­ius and Alun Stevens said peo­ple who switched to a re­tail or bankowned fund suf­fered the big­gest losses. About 80 per cent of peo­ple who switched to a re­tail fund earned lower in­vest- ment re­turns and 59 per cent paid higher fees.

The aver­age loss of in­vest­ment re­turns for some­one who switched to a re­tail fund was $925 a year and the aver­age fee in­crease was $263 a year.

Losses were also ex­pe­ri­enced by in­dus­try fund mem­bers. About 36 per cent of peo­ple who switched to an in­dus­try fund earned lower in­vest­ment re­turns and 50 per cent paid higher fees.

The aver­age loss of in­vest­ment re­turns for some­one who switched to an in­dus­try fund was $210 a year and the aver­age fee in­crease was $83 a year.

The re­search, which was com­mis­sioned by In­dus­try Su­per Aus­tralia, also found the most switch­ing ac­tiv­ity hap­pened about age 30, then ta­pered off un­til peak­ing just be­fore re­tire­ment.

ISA spokesman Matthew Lin­den said the re­sults in­di­cated peo­ple switch funds without un­der­stand­ing reper­cus­sions.

“The data sug­gests con­sumers switch­ing su­per funds are not mak­ing ra­tio­nal choices,” Mr Lin­den said yes­ter­day.

“Over­all, there are far less switch­ers to not-for-profit funds de­spite on aver­age de­liv­er­ing bet­ter net re­turns.”

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