What super fund members should know when comparing returns

Why you need to compare apples with apples on super fund performances and fees.

If you’re one of the roughly 16 million Australians with a managed superannuation fund account, you may be feeling reasonably chuffed at the moment.

After all, your account balance is probably higher now than it was just over a year ago, at the start of the 2023-24 financial year.

The buoyant returns on global financial markets over the last financial year, particularly on share markets, would have provided a performance tailwind for the many super fund members with an exposure to shares.

For example, the Australian share market, measured by the All Ordinaries Accumulation Index, gained 12.5% over 2023-24. The United States share market, measured by the S&P 500 Index, returned almost double that, gaining 24.1% over the 12 months.

Then add to investment returns the extra employer contributions you should have received as a result of the 0.5% increase in the compulsory Superannuation Guarantee levy to 11% from 1 July 2023. Those higher contributions, together with any additional contributions you may have made during the financial year, and combined with investment market returns, should have accelerated your balance by 30 June.

Retail and industry super funds have now started reporting their performance returns from 2023-24 from the various investment options they have available to their members.

What’s most important for super fund members is to make sure, if you’re comparing different super fund returns, that any quoted performance numbers shown are after all fees and costs, including administration fees, investment fees and costs, and transaction costs. Other fees and costs may also apply.

Comparing apples with apples

Your personal super return from 2023-24 will largely depend on the investment options you’ve chosen for your super, and how your super fund invested your money.

It’s important to be aware that not all super funds invest in the same way. For example, underlying Vanguard Super’s range of investment options are core assets classes such as Australian and international equities, Australian and international fixed interest, and cash.

By contrast, some super funds are known to invest heavily into unlisted direct property assets in Australia and overseas, infrastructure projects, private equity, and other alternative assets.

These types of assets can be wrapped into super products using conventional investment industry labels such as balanced, growth, and high growth.

This makes it difficult, if not impossible, for super fund members to accurately compare their super investments with those offered by other super funds.

Another key area where super investors should focus when analysing their latest performance returns is the fees being charged by their fund provider.

Comparing apples with apples on fees is equally as hard as comparing apples with apples on super fund investment returns.

There is a wide variation in the fees being charged by different super funds, with the Federal Government’s YourSuper comparison tool showing some super funds are charging their members more than double the amount of annual fees than other providers.

“Investment performance absolutely matters, but so do fees and costs, and neither should be viewed in isolation,” says Vanguard’s Chief Investment Officer, Duncan Burns.

“Coupled together, investment performance, and fees and costs are the factors that will materially impact your superannuation balance at retirement.”

Most Australians don’t know

Vanguard’s retirement research has found that many Australian are not engaged with their super.

As such, important considerations such as where and how their super is being invested, and the ongoing fees they are being charged, are under their radar.

“We know from our most recent How Australia Retires survey that almost 1 in 2 Australians don’t know what they pay in superannuation fees – and that’s concerning,” Mr Burns says.

“We’re doing our bit at Vanguard Super to ensure our members not only benefit from our low fees, but also have clear information about their fees.”

With Vanguard Super heading towards $1.5 billion under management in less than two years, Australians’ retirement needs are front and centre of the fund’s super offer.

“Nearly 50 years ago, the Vanguard Group pioneered index investing as a low-cost and effective strategy to help get people closer to their financial goals,” Mr Burns says.

“All of Vanguard Super’s investment options are indexed solutions which offer our members distinct advantages – diversification of assets to help reduce risk and weather market volatility; a focus on long-term performance to tap into the long-term returns generated by investment markets; and, critically, lower fees and costs to help keep more of our members’ money in their super to grow their savings and maximise their returns.

“By using indexed solutions for all Vanguard Super products, we’ve been able to keep our costs low while still delivering value and strong performance for our members so they can retire with confidence.”

^{Important information and general advice warning}

^{Vanguard Super Pty Ltd (ABN 73 643 614 386 / AFS Licence 526270) (the Trustee) is the trustee of Vanguard Super (ABN 27923449966) and the issuer of Vanguard Super products. The Trustee has contracted Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) (VIA) to provide some services to members of Vanguard Super. Any general advice is provided by VIA. The Trustee and VIA are both wholly owned subsidiaries of The Vanguard Group, Inc. (collectively, “Vanguard”). The retirement savings tips provided above are general in nature and don’t take into account your personal financial objectives, situation or needs. You should consider your objectives, financial situation or needs, and the Product Disclosure Statement (PDS) and Target Market Determination (TMD) before making any decision about Vanguard Super. The PDS and TMD can also be accessed free of charge by calling 1300 655 101. Before you make any financial decision regarding Vanguard Super, you may wish to seek professional advice from a suitably qualified adviser. Any past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. The information above is current as at time of publication and was prepared in good faith and we accept no liability for any errors or omissions.}

July 2024
Vanguard
vanguard.com.au