Anybody following the Hayne Royal Commission could be excused for thinking our superannuation system is broken. It is not – although parts of it need serious repair.
An excellent article in the Australian Financial Review of 18-19 August, addressed and dispelled a number of myths surrounding the superannuation system.
The author of the Chanticleer column identified the following myths:
Myth No 1: Poor returns. Not so. Over the last 20 years funds have produced average returns 5.1% pa AHEAD OF INFLATION.
Myth No 2: High fees. In fact fees have fallen 27% over the past 15 years.
Myth No 3: Australians are paying some of the highest fees in the world. In fact, this is not so when comparing “like for like” funds. Many of the overseas funds included in this comparison are very different in structure from the Australian funds, and often receive generous employer subsidies.
Myth No 4: The reform that lead to the creation of low cost MySuper default funds is a flop. In fact this reform is a long term process, and it will take time to work. There are signs of success, as some funds merge and this reduces costs.
Myth No 5: This says that past performance is the best guide to choosing a fund. However, this ignores the risks taken to get that return. Superannuation is a long term investment, and excessive focus on short term results may prove very costly.