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Widening super performance gap cause for alarm – new official data image
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Widening super performance gap cause for alarm – new official data

Published: 23 Aug 2017

The performance gap between industry and retail superannuation funds is widening, official figures released yesterday reveal.

An Industry Super Australia analysis of Australian Prudential Regulation Authority (APRA) data to June 2017 shows that not-for-profit industry funds continue to outperform bank-owned retail funds by a widening margin - 2.89 per cent over one year; 2.44 per cent over three; and 2.13 per cent over five.

Industry Super chief executive, David Whiteley, described the widening performance gap as ‘alarming’.

“It is well known that not-for-profit industry super funds dominate the performance league tables. Less known is the apparent widening performance gap between industry and retail super funds,” he said.

“For those Australians who entrust their savings to a bank-owned super fund, the trend is alarming”.  

“For the average income earner a 2 per cent performance gap may be a difference of around $200,000* at retirement. The new figures show the performance gap edging dangerously close to 3 per cent”.

“This is a concern for regulators monitoring the system; governments footing pension bills; and, most importantly, Australians saving for their retirement”.

Whiteley said retail super fund underperformance was the elephant in the room in public policy debates.

“Policy-makers serious about strengthening the retirement income system, must look at cross-selling, profit flows and performance within vertically-integrated financial institutions,” he said.

The APRA data also shows industry super funds’ outperformance in My Super products.

Table 1 - Rates of returns by sector, annual average (%)

  1 year 3 year 5 year 7 year 10 year
Corporate 9.4% 6.5% 9.2% 8.0% 4.4%
Industry 10.7% 8.1% 10.3% 8.7% 4.9%
Public Sector 9.4% 7.6% 9.8% 8.5% 4.9%
Retail 7.8% 5.7% 8.2% 6.7% 3.1%
Outperformance          
Industry v’s Retail 2.89% 2.44% 2.13% 2.03% 1.82%

Source: APRA Quarterly MySuper Statistics, June 2017

Outperformance over most periods is above 2 per cent, increasing each timeframe. In the past financial year, industry funds delivered net double digit returns compared to a low of 7.8 per cent for retail funds.

Table 2 – Annual net returns, representative member, by sector (%)

  Since Mar 2014 (3.5yrs) 3year 2 year 1 year
Corporate 6.90% 6.88% 6.26% 10.15%
Public sector 7.23% 7.36% 5.78% 9.89%
Industry 8.13% 8.36% 7.54% 11.36%
Retail 6.01% 6.56% 4.60% 8.76%
Outperformance        
Industry v’s Retail 2.12% 1.80% 2.94% 2.60%

Source: APRA Quarterly MySuper Statistics, June 2017. Note: Sector level returns are asset weighted averages.

The APRA Quarterly Superannuation Performance and Quarterly MySuper Statistics are here

David Whiteley is available for interview. Media contact: Phil Davey 0414 867 188.

*ASIC Money Smart calculator - start age 27, retire age 67, income $80,000 starting balance zero. Balance with investment returns of 4.5% = $442,402. Balance with investment returns of 6.5% = $663,270. Difference= $220,868 (Current dollars CPI deflated).

Past performance is not a reliable indicator of future performance. ISA Pty Ltd ABN 72 158 563 270 Corporate Authorised Representative No. 426006 of Industry Fund Services Ltd ABN 54 007 016 195 AFSL 232514.

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