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APRA statistics released this week show total superannuation assets increased 2.2% to $3 trillion in the year to December 2020, led by industry and public sector funds.
Industry fund assets increased by $46.5 billion (6%) to $817.9 billion, making them far and away the biggest fund type, while public sector funds increased by $21.2 billion (4%) to $552.6 billion. By comparison, retail fund assets shrunk by $4.9 billion (0.7%) to $633.6 billion.
Self-managed super fund assets fell marginally to $764.2 billion, despite an increase in the number of funds from 582,080 to 593,790.
Conversely, MySuper funds increased total assets by 1.3% to $812 billion, despite the number of products falling from 96 to 84 over the 12 months as smaller and underperforming funds merge.
Part of the growing gap between industry and retail super funds – the two types of funds that anyone can join – is due to performance. This in turn has led to members shifting their retirement savings from retail to industry funds as the fallout from the Royal Commission continues to dog the retail sector.
The average annual rate of return for all APRA-regulated funds to December 2020 was 3.1%. Public sector funds (up 3.6%) and industry funds (up 3.4%) outperformed, while corporate funds returned 2.7% and retail funds dragged the chain with an annual return of 2.3%.
Part of the reason for the difference in returns is asset allocation.
Overall, at the end of December the asset allocation of APRA-regulated funds was:
- 53% equities (23% Australian equities and 26% international equities)
- 11% cash
- 20% fixed income
- 8% property (3% listed, 5% unlisted)
- 6% infrastructure (1% listed, 5% unlisted)
- 3% other (of which 1% hedge funds).
While retail and industry funds hold similar levels of listed equities, industry funds held more infrastructure while retail funds held more cash and hedge funds.
Super funds by value of assets ($b) – December 2019 to December 2020
| Dec 2019 | Mar 2020 | Jun 2020 | Sep 2020 | Dec 2020 | |
|---|---|---|---|---|---|
| Corporate | 60.5 | 55.6 | 57.2 | 57.6 | 58 |
| Industry | 771.4 | 717.0 | 747.4 | 761.0 | 817.0 |
| Public sector | 531.4 | 519.3 | 530.5 | 535.4 | 552.6 |
| Retail | 638.5 | 558.3 | 593.2 | 597.7 | 633.6 |
| Self-managed super funds | 764.8 | 697.9 | 733.9 | 727.1 | 764.2 |
| Other | 194.1 | 193.6 | 196.2 | 198.3 | 192.3 |
| Total | 2,977.4 | 2,748.5 | 2,872.3 | 2,888.2 | 3,043.1 |
Source: APRA
Customer satisfaction
Also this week Roy Morgan released their latest report on customer satisfaction with financial performance with superannuation.
The report measured the six months to January 2019, and showed industry funds scored an average of 62.1% satisfaction, compared to an average of 57.3% for retail funds.
In January 2018 the gap was much smaller – industry funds scored 60.7% and retail funds scored 59.1%.
The Roy Morgan survey was based on more than 23,000 respondents and it’s worth noting that the percentage only relates to those very or fairly satisfied with financial performance, rather than satisfaction with the fund as a whole.
The 10 super funds with the highest satisfaction are listed below:
Last week Roy Morgan released its latest report on customer satisfaction with the financial performance of their super fund.
In the six months to January 2020, satisfaction reached a record high of 67.6% as fund members drew a collective sigh of relief when it became clear that returns for 2020 would be positive. Earlier in the year financial markets plunged due to COVID and the federal government announced stimulus measures including early access to up to $20,000 of their super for members facing financial hardship. According to Roy Morgan CEO Michele Levine, this focused people’s attention on their super and their fund’s performance to an unusual degree. “And Australians have never been more satisfied,” she says.
Public sector fund members were the most satisfied with an average satisfaction rating of 75.7%. SMSF satisfaction was close behind at 75.6%.
“It’s not surprising to see public sector fund members the most satisfied – some members have the security of now phased-out defined benefit funds, while others receive more than the legally required 9.5% employer contribution,” says Levine. And as the APRA statistics above show, they also provided the highest annual rate of return.
“As for self-managed super funds, well you’d hope their members were satisfied with performance since they are the ones making the investment decisions!” she says.
Industry fund members’ satisfaction over the six-month period was 67.5%, while 63.1% of retail fund members felt satisfied with their fund’s performance. Tellingly, given the Royal Commission findings, satisfaction with retail funds run by the Big 4 banks was lower at 61.4%.
The Roy Morgan survey was based on more than 15,000 respondents and it’s worth noting that the percentage only relates to those very or fairly satisfied with financial performance, rather than satisfaction with the fund as a whole.
The ten super funds with the highest satisfaction are listed below:
| Super fund | Satisfaction rating |
|---|---|
| Catholic Super | 78.5% |
| Cbus | 78.2% |
| Tasplan | 76.5% |
| UniSuper | 76.4% |
| Macquarie | 72.9% |
| CARE Super | 72.5% |
| OnePath | 69.8% |
| AustralianSuper | 69.5% |
| Mercer | 66.9% |
| MLC | 64.4% |
Source: Roy Morgan, February 2020
Fund performance: Industry funds vs retail funds
In July 2018 Chant West reported that industry funds beat retail funds in performance for the 2017/2018 financial year, and every other timeframe for the last 15 years.
Performance by industry segment (results to 30 June 2018)
| Fund type | 1 year (%) | 3 years (% per year) | 5 years (% per year) | 7 years (% per year) | 10 years (% per year) | 15 years (% per year) |
|---|---|---|---|---|---|---|
| Industry funds | 10.3% | 8.5% | 9.7% | 9.1% | 6.9% | 8.1% |
| Retail funds | 9.0% | 6.9% | 8.5% | 8.4% | 6.3% | 7.2% |
Source: Chant West
Chant West senior investment manager, Mano Mohankumar says: “Over the longer term industry funds, as a group, have outperformed retail funds largely because of the way they have allocated their investments and their preparedness to vary those allocations to suit changing market conditions.
“Specifically, they have always tended to have higher allocations to unlisted assets such as private equity, unlisted property and unlisted infrastructure (currently 21% versus 5%), which have performed well for them. This means they have less invested in traditional asset classes such as listed shares, REITs and bonds. Those allocations to unlisted assets have meant slightly higher investment costs, but those extra costs have been more than justified by the better performance and lower volatility.
Differences in returns compound over time
The difference in the 15 year performance may not seem that much:
- 8.1% for industry funds
- 7.2% for retail funds
But that difference of 0.9% each year makes a huge difference due to compounding. Using SuperGuide’s Super fees and returns calculator I calculated would the two returns would make over a 30 year period for a 35 year-old earning $80,000 per year with a $75,000 super starting balance, and only counting the 9.5% employee super guarantee contributions.
Assuming a 1% fee across both funds, and adjusting for inflation of 3%, the results below are shown in today’s dollars.
- 8.1% returns each year ends up with a super balance of $683,807
- 7.2% returns each year ends up with a super balance of $566,472
That’s a gap of $117,334, or more than 20% higher for the 8.1% return. When you may have 30 or 40 years of retirement that can make a huge difference to your standard of living.
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