DEBORAH KNIGHT:
Interesting news through today that workers, especially in Sydney, are delaying their retirement, particularly during the pandemic; and it’s not just because of COVID. A number of reasons for it, including the fact that because we can’t go anywhere, people don’t see the point in quitting the workforce because you can’t exactly sail off into the sunset, travel overseas or travel around the country. So, people are saying, “Well, I may as well keep working.” But even if you do plan on working for longer than expected, you should always think about your retirement plans and your superannuation and the results from the Federal Government’s first annual performance test for super funds has been published today as well. The Minister for Superannuation and Financial Services Jane Hume is on the line now. Minister, thanks for joining us.
JANE HUME:
It’s great to be with you, Deb. And before I begin, can I just say congratulations on those ratings. That’s really good news to see such a good show being recognised but, more importantly, a good woman kicking goals particularly on this, which is Equal Pay Day today.
DEBORAH KNIGHT:
Yes, there you go. Well, we have to work on the pay side of things. But well done, Jane. Thank you for that. I do appreciate your kind words.
Now, we’ve spoken before about the YourSuper comparison tool, but this result that you’ve released today, the first annual performance test, how are the super funds performing overall?
JANE HUME:
Yes, the new performance data has been published today on the ATO’s YourSuper comparison tool, and it will alert members to funds that didn’t meet their performance benchmark, that didn’t deliver to members what they promised. So, some super funds will discover – some super fund members will discover that what was written on the box wasn’t entirely what was delivered. And they can go on to that online YourSuper comparison tool and see whether their fund is one of those ones that have underperformed. Even if they don’t go online, if your fund has underperformed, your fund is now compelled to send you a letter in the next month to tell you that they have not delivered on their promise and to direct you to that online comparison tool so you can see, comparing apples with apples, which fund might better suit you.
DEBORAH KNIGHT:
I’m glad that you are actually getting some clarity in this space because it can be really confusing for people to try to compare super funds, but what is classified as an underperforming product when it comes to superannuation? How do you define it?
JANE HUME:
Well, funds are compared on a basis of their performance net of all fees, so that’s investment fees, as well as administration fees. So, those funds that have lower fees will also be better performers. And the important thing here is what we’re doing is hauling the performance of super funds out of the shadows and bringing them into the bright sunlight of accountability, which is going to be uncomfortable for a number of funds. But it’s important that people can understand their superannuation and make better decisions for themselves. Thanks to the reforms that we’ve put through in the last few years, fees generally are lower; members are allowed to choose their own super fund, whatever super fund they want, now; lost super can easily be found and with just a couple of clicks can be consolidated into one account; and now we’re ensuring that super funds can be compared, apples to apples, on the basis of performance and fees so that people can make a really informed choice based on real information and not expensive advertising campaigns.
DEBORAH KNIGHT:
And you’ve looked at the performance of 76 products overall, and among them there were some doozies who were just really below the grade, weren’t there?
JANE HUME:
Yeah, there were about 13 funds that have underperformed and those 13 funds have around $50 billion in them from Australians and around one million accounts. So, there’s going to be a lot of people who get that letter to say, “Hey there, maybe you should consider changing funds or looking for a fund that better suits you”.
DEBORAH KNIGHT:
How easy is it to do, though? Because we’re often told that, if you don’t like it, just change funds. Is it a simple process? You mention that you can consolidate by clicking through the tax office. That’s one way of doing it. But a lot of people just sort of set and forget with their super still.
JANE HUME:
They do, and we want as many people to engage with their financial wellbeing and their retirement outcomes as possible. Now, that you’re giving up one dollar in 10 of everything you earn and putting that towards your superannuation, it’s actually a very significant amount of money. There’s $3.3 trillion in the Australian superannuation system. That is bigger than GDP. It is bigger than the ASX. This new online comparison tool and the changes in Your Future, Your Super package that we put through with the Budget should save members around $17.9 billion over the next 10 years, straight into their retirement outcomes.
DEBORAH KNIGHT:
It’s a lot of money to be playing with. Just with the retirement age as well, are you surprised to see that age getting older and older? Obviously, many people – there’s many factors at play here, but a lot of people are thinking, “Well, what’s the point in quitting at the moment or retiring because I’ve got nowhere to go?”, but others are needing to work for longer to pay their way into their later years.
JANE HUME:
That’s true. A number of people are also choosing to work for longer because they know that retirement these days looked very different to the way it did 30 years ago when the superannuation system was first invented. Some people are taking their time to get to retirement, working part-time or doing some charity work as well as their paid work as well. And, of course, people are living longer, and they want to make sure that their retirement is a rich experience, not just monetarily but also personally as well.
DEBORAH KNIGHT:
I know that with superannuation, I’ve had a number of listeners get in contact with me who have been struggling financially with the latest lockdowns and restrictions, and they were able to get access to their superannuation funds last year. Many are asking: why can’t they do it this time around?
JANE HUME:
Yes, last year when we announced the early release of superannuation, that was in March just at the very beginning of the COVID pandemic, and, you know, things were a little bit different then and you couldn’t really see the light at the end of the tunnel, and a lot of people were finding themselves unemployed for the very first time in their lives. Now, we have in place a number of supports, including the COVID disaster payment for people who are finding themselves temporarily out of work because of those lockdowns, and there’s also support for small and medium enterprises that are struggling to get their way through. The good news is, though, we know that the more people get vaccinated the sooner we are going to be able to get out of these lockdowns and get back to normal as soon as we possibly can.
DEBORAH KNIGHT:
Is it worth considering, though, because many people are struggling and we don’t have JobKeeper like we did last year and a lot of families are saying getting access to their super helped them out during lockdowns last year; why can’t it be on the table this time around?
JANE HUME:
Yes, it was a very successful program last year and we know that the vast majority of people who took their superannuation out – and there were around 3.5 million or so that did so – used that money to pay down bills, to pay off debt, to pay those emergency – those emergency bills really were tapping at the door. Things are a little bit different this time around. The Opposition Labor have made it very clear that they will not support the Government to introduce another round of the early release of superannuation, and we now have the systems in place to support the people who are really doing it tough.
DEBORAH KNIGHT:
All right. Now, just a question from a listener; Terry on the text line says that his super fund returned 22.3 per cent for the last year, balanced options, one of the big funds. Is that a pretty good result compared to some of the others?
JANE HUME:
Yes, that’s a terrific result. In fact, that would be one of the top two or three, performers I’d imagine. I think I can guess which fund it is, but we won’t name them on air. Some funds have done exceptionally well in the last 12 months. The most important thing to understand, though, is that even if your fund seems to have done reasonably well – it might have returned 12 or 13 per cent, you think, hey, that’s pretty good – it’s how it compares to the rest of the superannuation funds out there. That’s been a problem in the past. Some funds have sent out a message saying, “Hey, Deb, your super fund has returned eight per cent this year.” And you think, “Oh, that’s pretty good. It’s better than a term deposit.” But the problem is you don’t know whether the other funds have returned 12 or 13 per cent. But this is what the online comparison tool with the ATO website will show you. It compares apples with apples so you can see how your fund compares to others out there.
DEBORAH KNIGHT:
Yeah. It’s a good move that is for sure. Jane, thanks so much for joining us yet again on Afternoons.
JANE HUME:
It’s great to be with you, Deb.
DEBORAH KNIGHT:
Jane Hume there, the Minister for Superannuation. And the info for the comparison tool that she mentioned, it is ato.gov.au/yoursuper-comparison-tool. If you go to the ATO website and then look for the YourSuper comparison tool, you’ll find all the details there because it’s important to keep on top of your super even though many of us do kick that can down the road. If you don’t have a fund that is performing well, it can cost you a lot of coin in your later years.