Super news for May 2024

Active fund managers underperform the market

In most cases, Australian share investors would have been better off putting their money in an ASX 200 index fund than in an actively traded managed fund.

According to the Standard & Poor’s SPIVA Australia Scorecard, more than three-quarters of active fund managers in the Australian equity general category failed to keep up with the S&P/ASX 200 index last calendar year, and over the long term.

The SPIVA Scorecard measures the performance of actively managed funds relative to the relevant benchmarks over various time horizons.

The one-year underperformance rate for Australian equity general funds in 2023 was 77%, which was the second highest in the group’s records which go back to 2009. The 15-year underperformance rate was 85%.

The underperformance rate in the international equity general category was 81% of active funds performing worse than the S&P Developed Ex-Australia LargeMidCap’s total return of 24.1%. Over the 10- and 15-year horizons, around 94% of funds underperformed.

Australian bond fund managers fared much better last year with just 26% of funds lagging the index. Over the longer term, 56% and 46% underperformed over three- and five-year periods, respectively.

Australians from non-English speaking backgrounds face super savings gap

Australians from non-English speaking backgrounds (NESB) are facing a retirement savings gap when compared with the overall population, according to new research from the Association of Superannuation Funds Australia (ASFA).

While overall median balances for NESB Australians have lifted, from $35,000 to $100,000 for males and $19,000 to $50,000 for females in the eight years to 2022, that is still lower than the equivalent general population, where median balances were $250,000 for males and $170,000 for females.

“People from non-English speaking backgrounds make up 16% of total super account holders in Australia and, unfortunately, their super balances are lower across every age group when compared with the general population,” ASFA chief executive officer Mary Delahunty said.

“The upcoming Federal Budget presents a clear opportunity to address the retirement savings gap for people from non-English speaking backgrounds. ASFA is calling for an increase in the Low-Income Superannuation Tax Offset (LISTO), which would boost the low super balances of more than 200,000 people from non-English speaking backgrounds,” Ms Delahunty added.

Super fees for no service still an issue

Superannuation trustees need to do more to ensure financial advice fee deductions are appropriate, according to the Australian Securities and Investment Commission (ASIC).

A recent ASIC report that looked at 10 sample superannuation trustees representing approximately eight million members, managing a combined $923 billion in assets (as of 30 June 2023), found over $990 million in advice fees were charged across more than 476,000 member accounts over a 12-month period.

The report also revealed three trustees reported not checking any advice documents on a risk or random basis; found fee caps as high as $20,000 or 5% of a member’s balance were in place, with few trustees implementing controls to protect members with low balances; and members of 70% of trustees were found with advice fee deductions exceeding $15,000.

“Despite repeated calls for an uplift in practices from ASIC and APRA in joint letters issued in 2019 and 2021, our latest review shows continued deficiencies in trustee oversight of advice fee deductions by some trustees,” ASIC Commissioner Simone Constant said.

 “ASIC is concerned about the potential impact on superannuation members, particularly amid evidence of balance erosion from fee deductions for advice originated by cold calling business models using questionable sales tactics that pressure members into switching superannuation funds.”

Super for housing proposal faces opposition

The Senate Economics Committee Interim Report into existing and proposed super for housing policies has recommended that first home buyers be able to access more of their super for a deposit for their first home.

“As canvassed in the report, the committee received evidence from actuaries Michael Rice AO and Jonathan Ng that a much higher cap would be appropriate so that first home buyers have enough flexibility to withdraw the adequate amount required to form a deposit,” chair of the committee and Liberal Senator Andrew Bragg said.

Bragg said that the analysis found for a 35-year-old who used super for a 20% deposit on an $800,000 unit, the value of that equity in the unit in today’s dollars would be worth $1.2 million 30 years later at the point of retirement. This is compared to only $319,000 had it remained in super.

However, that would mean the 35-year-old would have to have at least $160,000 in superannuation at that point, which the Association of Superannuation Funds of Australia (ASFA) points out would advantage those who already have a larger super balance and income and are more likely to be able to afford a home.

ASFA research has found that most people would not have the super balances required to support buying a home in many major cities, regardless of how much of their super they would be able to access.

Modelling by Deloitte for the Superannuation Members Council (SMC) has also found that policies encouraging Australians to use their super for a house deposit could cost taxpayers a cumulative $1 trillion and push up house prices.

“Ideas to break the seal on super don’t help get more young Australians into homes – they just leave people with less savings in retirement, put more pressure on the federal budget, and run up a bigger Age Pension bill that all taxpayers have to fund,” Super Members Council chief executive officer Misha Schubert said.

Annual scam losses drop

Annual scam losses have declined for the first time since 2016, according to the Australian Competition and Consumer Commission’s 15th annual Targeting Scams report.

The report found that in 2023, Australians lost $2.7 billion to scams, down from $3.2 billion in 2022, a 13% decrease.

Scam losses also decreased by 21% in the second half of 2023 compared to the first half of the year.

The report combines data from Scamwatch, ReportCyber, AFCX, ASIC and IDCARE to analyse scam trends in Australia by contact method and scam type.

The report also found investment scam losses decreased by 13%, remote access scam losses increased by 12%, romance scam losses decreased by 4%, phishing scam losses decreased by 13% and payment redirection scam losses decreased by 59%.

Australians still neglect super

Research by the $280 billion Australian Retirement Trust (ART) has found that more than two thirds (67%) of Australians don’t feel their super is in a good position for their age and only 37% know how to manage their super investment options.

ART’s executive general manager of advice, guidance and education Anne Fuchs said the research shows millions of Australians aren’t engaging with their super, and many more feel their balance isn’t in a good position for their age.

“The average balance of our more than 2.3 million members this month is $123,000. If they had $123,000 in cash on their dining room table, I think they would pay attention to it, and we want them to do the same with their super,” she said.

The research also found that 22% of Australians haven’t checked their super account in the last 12 months. On a more positive note, 31% have received financial advice in the last year.