Financial Services Council (FSC) analysis has shown Australians who make active informed choices about their superannuation early in life could be hundreds of thousands of dollars better off when they reach retirement.
The research, conducted by NMG Consulting on behalf of the FSC, found an individual who switches from the most expensive MySuper option to the cheapest index option, within the top 10 funds measured by assets under management, at age 30 could be as much as $1.2 million wealthier in their retirement.
The report also found someone who switches from their default fund to a high-growth simple choice product at age 30 and then switches back at age 55 could boost their retirement savings by $690,000.
“People engaging with their superannuation and making active choices at pivotal life stages, such as early career and retirement, can have a material impact on their financial future,” FSC chief executive Blake Briggs noted.
Further, the study revealed remaining in MySuper products, which are typically underweighted to growth assets by 14 per cent, could leave Australians under 50 $540,000 worse off at retirement.
On the back of the research, Briggs called for any policy proposals designed to address predatory behaviour alleged in the Shield and First Guardian collapses not to make it harder for people to exercise control over their superannuation.
Recognising MySuper products supported disengaged members to accumulate super, he indicated they were not the best choice for everyone, given the superior outcomes the analysis discovered could be achieved from switching early.
“In times of volatility, access to quality advice and strong engagement can help members stay focused on their long-term retirement goals and avoid reactive short-term decisions, supporting better retirement outcomes over time,” he explained.
It was found fees on platforms, which are commonly used by financial advisers managing superannuation and other investments on behalf of clients, have come down as well. Scrutiny of platform fees found the average MySuper fees for a member balance of $50,000 were 88 basis points compared to 95 basis points for a compact wrap and 54 basis points for a mini-wrap.
It was also revealed for a larger balance of $500,000, platform fees of 67 basis points for a compact wrap and 52 basis points for a mini-wrap were actually cheaper than the average MySuper fee of 77 basis points. Average fees on a full wrap for a balance of that level were 88 basis points.
