Investment performance: Benchmarking super fund returns

Q: What you do is very important, thank you. I am 62 years, retired and draw an allocated pension. What I need is to get sound independent advice about whether I am in the best fund for my needs and how my super fund compares. I am considering a change to Australian Super, but I need to know whether Australian Super is secure and strong (as I believe it to be?); what is the Australian Super return for an Allocated Pension in their Cash Option for the past 12 months, and is there a better Cash option Allocated Pension on offer from some other secure fund?

Trish’s response: Many thanks for your words of support for SuperGuide. We believe there is a need for a free and independent site for consumers on superannuation, and the many emails that we receive and the exciting growth in the number of new and regular visitors to the website, has confirmed that a website such as SuperGuide is necessary.

SuperGuide provides independent information on superannuation for consumers. In keeping with the independence of the website, we do not operate a financial advisory business, and we do not recommend particular advisers or financial products or organisations. We do however operate the SuperGuide Directory which allows advisers and other super-related service providers to list for free, and serves as a starting point for our readers seeking expert assistance.

I cannot provide you with specific financial advice about your investment options, or whether AustralianSuper is a secure option, or whether there are better cash options available in the market place. What I can do is provide some general information for anyone hoping to compare their super fund’s investment returns with other super funds in the market.

Checking the reputation of a super fund

For example, if a reader is seeking information on whether a super fund is secure and strong you can visit the particular super fund’s site or phone the super fund and ask them this question. For an outsider’s view, many of the large super funds, including AustralianSuper, are reviewed by rating companies such as SuperRatings, SelectingSuper and ChantWest, which, depending on the rating a super fund receives, generally indicates the super fund is going to be around for awhile. You can visit any of these rating company websites to find out what ranking a super fund has received. I also provide a periodic summary of the top-performing super funds in the article Investment performance: We’re the best super fund. No we’re the best…

Reviewing a super fund’s investment performance

If you’re seeking information on assessing your fund’s investment performance, then you need to be mindful of at least three factors that determine a fund’s investment performance – asset allocation, level of fees (after tax) and quality of investment management over the longer term. For example, a cash option is going to deliver a lower return over the longer term than shares or property, even though for the previous two years or so, cash was king.

You can find out the performance of AustralianSuper’s cash option, and other investment options on its website (www.australiansuper.com) and the performance history page is here. This particular page on the website may be a useful reference for anyone interested in comparing the returns of super funds because along with the specific returns delivered by AustralianSuper, at the bottom of the webpage you can click on a spreadsheet that provides the benchmark returns for the different investment options, which you can measure against your own fund’s returns. Many super funds present the investment performance data in a similar format.

You may also be interested in some of the following free or low-cost information services.

  1. Check out APRA whole-of-fund performance tables. The Australian Prudential Regulation Authority releases league tables listing the investment performance of the 200 largest APRA-regulated super funds. Note that the APRA tables don’t report investments returns on pension accounts (see Point 4), or returns on the different investment options available within a super fund. Find out more about the APRA tables by reading the SuperGuide article Exposing the performance history of Australia’s largest 200 super funds or access the APRA tables directly by clicking here.
  2. Follow the daily newspapers. Monthly, or quarterly, many of the major daily newspapers publish tables containing the top performing super funds and what the benchmark returns are for the different investment options. If your fund is missing from the top 10 or 20, that doesn’t necessarily mean your super fund is a dud performer because often the periodic tables are measuring the top performer for that month, or that quarter. What matters is whether a super fund is delivering a strong return over a long period of time. Some of the daily newspapers (usually on a Wednesday) also provide data on many of the retail superannuation funds. Retail super funds are generally offered by banks and other similar financial organisations.
  3. Ask your super fund for advice. In July 2009, the Australian Securities and Investments Commission (ASIC) announced that super funds can now provide a limited form of financial advice to its fund members, provided the super fund holds an Australian Financial Services licence. The motivation for introducing this cheaper advice service is to give Australians some guidance when making decisions about increasing super contributions, changing investment options, or taking out life insurance within a person’s existing super fund. This cheaper advice option does not allow your super fund to give you more complex retirement planning advice, or to give advice about switching funds. The new option is explained in my interview with ASIC’s former head of superannuation, the chief architect of this new low-cost advice concept, and what it means for consumers, in THE SOAPBOX EXCLUSIVE: Cheap financial advice now available – what does it mean for consumers? Many super funds are now offering intra-fund advice, and in many cases this advice is provided free of charge. Ask your super fund what they can offer you in terms of intra-fund advice.
  4. Check out ratings companies. SelectingSuper, ChantWest and SuperRatings provide a consumer service rating funds on different levels. You can compare one or two funds against your existing super fund for a fee. For no cost, you can check out the ratings for most of the large super funds available in the marketplace. SelectingSuper also provides free information on the top-performing pension funds.

Comparing funds: You can find more information on comparing super funds in the special section on the topic by clicking on the tab at the top of this website or by clicking here: ‘comparing funds’.

Financial advice: You can find more information on financial advice, and finding an independent adviser by typing in ‘financial advice’ in our search function at the top right-hand side of SuperGuide website.

© Copyright Trish Power 2009-2014

Copyright for this article belongs to Trish Power, and cannot be reproduced without express and specific consent.

IMPORTANT: SuperGuide does not provide financial advice. SuperGuide does not answer all questions posted in the comments section. SuperGuide may use your question or comment, or use questions from several readers, as the basis for an article topic that we publish on the SuperGuide website. We will not disclose names or personal information in these articles. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Readers need to seek independent advice about their personal circumstances.

Comments

  1. Scott Barlow says:

    What is the best fund for your superannuation needs? The answer will not be found by asking questions of the ‘strength’ of the Superannuation Fund, or how it compares versus others. The best Fund for your needs is the one that achieves your investment goals and objectives! As far as comparisons or benchmarks go the only benchmark that matters is your benchmark – “…are you on track to achieve YOUR goal and objective?” How your investment is faring relative to everyone else doesn’t matter a jot. If you’re not on track to achieve your goal and objective, nothing else matters. Good investment advisers should focus not on the features of the investment products that are available, or the relative value or performance of your investment versus another but (a) whether you’re on track to achieve your goal, (b) what to do if you’re not, (c) whether you are exposed to any risk that could permanently compromise your ability to achieve your goal and objective, (d) how to budget to achieve your objective, and (e) how to ensure you don’t outlive your savings. These are the things that are well within an Advisers influence or control and whaddayaknow…these are also the things that keep ordinary Mum & Dad investors awake at night. When you go to an Adviser, before you pay them any money…check this list. If the Adviser can’t demonstrate how they will address these 5 issues find an Adviser who can.

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