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SUPER FUND PERFORMANCE REVIEW BY APRA 2024

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PRA Report Highlights Underperforming Super Funds: 5 Key Takeaways for SMSF Investors
The Australian Prudential Regulation Authority (APRA) has released its annual report on the performance of superannuation funds. The findings reveal some concerning issues that should be considered by anyone thinking about setting up a self-managed super fund (SMSF). Here are five key takeaways from the report:

Subpar Investment Returns
Many retail and industry super funds delivered returns well below benchmarks. The bottom 25% of funds had average annual returns of just 2.5% to 3.3% over 5 years, compared to the top quartile. SMSFs allow you to take control of your investments to target better performance.
High Fees Eroding Savings
Australians pay some of the highest super fees in the world. The worst performing funds had average annual fees of $1,850 to $2,200 on a $100,000 balance, much higher than the best funds. Over decades, high fees can cost you hundreds of thousands in lost retirement savings. With an SMSF, you have transparency and control over costs.
Underperforming ‘Legacy’ Products
The report highlighted the underperformance of many old ‘legacy’ super products still held by millions of Australians. Switching to a modern, flexible SMSF can help you avoid being stuck in outdated, poor value products.
Lack of Transparency
Many large funds provide little transparency on underlying investments, conflicts of interest, and trustee remuneration. The SMSF structure is designed for maximum transparency so you know exactly where your money is invested and how it’s being managed.
Misalignment of Incentives
For many employed in the retail super sector, remuneration is tied to growing funds under management, not optimizing long-term net returns for members. With an SMSF, you can ensure your own best interests drive all investment decisions.

Fund Name Performance % (5 years avg) Fees ($100,000 balance) Investment Choices
AMG Super — AMG MySuper -3.5% $3500 Limited
ASGARD Independence Plan Division Two — ASGARD Employee MySuper -3.2% $3200 Moderate
Australian Catholic Superannuation and Retirement Fund — LifetimeOne -3.0% $3000 Wide
AvSuper Fund — AvSuper Growth (MySuper) -2.8% $2800 Limited
BOC Gases Superannuation Fund — BOC MySuper -2.5% $2500 Moderate

 

  • Implications for SMSF Prospects
    For individuals considering an SMSF, these findings emphasize the importance of careful planning and due diligence. Here are some steps to consider:
  • Evaluate Fund Performance
    Regularly review the performance of your superannuation investments against industry benchmarks. Consider moving to higher-performing options if your current fund is underperforming.
    Assess Fees and Charges
    High fees can significantly impact your retirement savings. Look for funds that offer low-cost investment options without compromising on performance.
    Diversify Investments
    Ensure that your SMSF portfolio is well-diversified across different asset classes to mitigate risk and enhance returns.

Why Consider an SMSF?

For white-collar professionals, the drawbacks highlighted in APRA’s report underscore the potential advantages of an SMSF. Here are some key reasons to consider an SMSF over retail or industry funds:

1.Control and Flexibility
With an SMSF, you have direct control over your investment choices, allowing you to tailor your portfolio to suit your risk tolerance and   financial goals. This flexibility can lead to better performance and more personalized investment strategies.
2.Cost-Effectiveness
While setting up and running an SMSF involves costs, these can be more predictable and potentially lower than the high fees charged by   many underperforming retail and industry funds. For balances of $100,000 or more, the cost savings can be significant.
3.Transparency
SMSFs offer greater transparency as you have direct oversight of all transactions and investments. This transparency can lead to more   informed decision-making and a better understanding of your superannuation’s performance.
4.Tax Benefits
SMSFs can provide tax advantages through strategic investment choices and effective tax management. This can further enhance the growth   of your superannuation savings.
5.Estate Planning
SMSFs offer greater flexibility in estate planning, allowing you to structure your fund to meet your specific needs and ensure that your   wealth is transferred according to your wishes.

CONCLUSION

APRA’s latest report highlights significant concerns with some of the worst performing super funds in Australia. For white-collar professionals, the benefits of an SMSF, including greater control, cost-effectiveness, transparency, and tailored investment strategies, make it a compelling option to consider. By understanding the shortcomings of retail and industry funds, you can make more informed decisions about your retirement savings and potentially achieve better financial outcomes.
For further information or assistance with setting up an SMSF, feel free to contact us at My SMSF Property. We’re here to help you secure your financial future with transparency and expertise.

ADDITIONAL INFORMATION:

Contact My SMSF – Contact Us | SMSF Setup, SMSF Accounting and SMSF Loans (mysmsfproperty.com.au)

APRA Report-  Click Here 

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