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Super switching leaving consumers short-changed

Switching of funds, Superannuation, house property, coins

Around half of Australians who switch funds are copping “significantly higher fees” while simultaneously seeing lower returns, Industry Super Australia has said.

The new Rice Warner report, commissioned by Industry Super, reveals that in the year to June 2015, the estimated increase in super fees for those members paying higher fees came to $170 million per annum.

The research was informed by data from the Australian Prudential Regulation Authority together with Rice Warner’s own Superannuation Study.

According to those datasets, the vast majority (92 per cent) of those experiencing higher fees and lower returns, courtesy of switching, had occurred within the retail sector.

That figure accompanies the fact that retail super funds were the most common switching destination, accounting for 72 per cent of switches.

“Technology and banking relationships are being used to entice people to switch without thinking. It is clear fee disclosures and consumer safeguards need to be urgently strengthened,” said the public affairs director at Industry Super, Matt Linden.

“Logically, consumers exercising informed choice would switch to lower-fee and higher-performing super funds but the reality is quite different,” he continued.

“It appears that consumers are simply making uninformed decisions in a highly complex area.”

The survey found that the majority of switching occurred with clients around the age of 30, before peaking again just before retirement age.

Further, those with balances in excess of $50,000 were more likely to switch to retail funds and those with balances of more than $100,000 were twice as likely to switch to an industry fund, as opposed to a retail fund. 

However, the smaller the fund size, the more likely they were to be rolled over to another fund, regardless of the sector. 

 

Super switching leaving consumers short-changed
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