Imagine reaching retirement, only to discover you’ve been losing out on hundreds of thousands of dollars. It sounds like something out of a nightmare, but for many Australian retirees, it’s a reality they’re facing. The problem? Their superannuation funds are underperforming, and they don’t even know it.
The Big Missed Opportunity
A new report from Super Consumers Australia reveals that nearly a third of retirement products are performing far worse than they should be, costing retirees an eye-watering amount of money over time. In fact, retirees with a super balance of $250,000 invested in the worst-performing funds could miss out on anywhere between $57,000 and $205,000 in returns across their retirement years. Yes, you read that right—up to $205,000!
For many people, that could mean a huge difference in their lifestyle. Think about it: fewer vacations, fewer comforts, maybe even having to rely on the pension for a longer period than expected. It’s a grim reality, and the worst part is, most retirees have no idea that this is happening. It’s like driving your car around with a flat tire, unaware that your engine is struggling.
Why Doesn’t the System Protect Retirees?
The sad irony here is that Australia’s super system is supposed to provide financial security for people in retirement, not leave them in the dark. The Australian Prudential Regulation Authority (APRA) introduced a performance test for superannuation funds back in 2021, but there’s a catch: it doesn’t apply to retirement products. So, while workers get some protection against poor fund performance, retirees do not.
Dr. Katrina Ellis, deputy CEO of Super Consumers Australia, has pointed out to 9News that this discrepancy is unfair. Retirees, who often live on a fixed income, deserve the same level of protection. The idea that someone can work hard their whole life, only to retire and lose money in a subpar fund, is troubling.
Retirement Products: A Complex Issue
Of course, as with any report that calls out big players, there’s some pushback. The Financial Services Council (FSC) argues that retirement products are more complex and cater to individual needs, such as flexibility and income stream security. They worry that a one-size-fits-all approach focused only on investment returns could push people away from funds that may suit their specific retirement needs.
But for many, it’s hard to ignore the fact that underperforming funds are hurting retirees, and something needs to be done. The government is reviewing the superannuation system, and experts are calling for an expansion of the performance test to include retirement products. If retirees are to avoid losing hundreds of thousands of dollars, this change is necessary.
