Ramblings of an Extreme Man

Superannuation or Suckerannuation?

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What if I asked you how much Superannuation you had, would you know?

What if I asked you if you knew what fees and insurance premiums were coming out of your Superannuation every month, would you know that?

What if I asked you how you knew that your Superannuation Fund had your best interests at heart and wasn’t just trying to line it’s filthy unproductive finance industry pockets at your expense?

Would you tell me something like it’s the super fund for <insert profession>’s and they really understand the challenges  and  circumstances of <insert profession>, and they also have inclusive ads on TV, the radio and at bus stops shaming other “fund industry suits” but saying that their suits are different all the while they’re claiming great investment performance, whatever the hell great investment performance means???

 

Yes? No?

 

I’ve recently taken a serious interest in Superannuation and retirement. For example I spent approximately 8 hours on a weekend a few weeks ago trawling the Australian Tax Office website learning all about how Super is taxed, how it can be accessed early, concessional limits, lifetime annuities and self-managed super funds. All very exciting stuff to an Extreme Man.

Anyway, without getting too far into my crazy ideas about early retirement I thought I should look at my super and work out how much I have and how it has been performing.

I have a Super Fund with VicSuper, and like many Australians I use it only because an employer years ago used it as their default option.

I logged in to their members website and found after my 18 years of working, I’ve managed to accumulate about $46,000, not too bad I suppose for an Extreme Man that tends to take extended holidays all the time, but after a little bit more investigation on their clunky website I managed to find that I was being charged about $60 a month in various fees! To put that in perspective, that’s about enough for 15 beers every week at Public Bar on a Monday!!! Or, assuming this extra 60 dollars a month was allowed to embrace the super power of compound interest, at an interest rate of 6% this $60 a month would turn into approximately $120,000 over a 40 year time-frame!!!

The next obvious step was to investigate these fees further by trying to export every single transaction from my super account since it was started way back in 2001.

I found that the transaction records on the website only went back about a year… Helpful.

I then called their contact number and said that I’d like every single transaction for my super account all the way back to the beginning of space and time. The response I got was something along the lines of they only provide what they need to provide under the regulations, which is about 10 years of history, and I couldn’t get this in an easy to use format I would need to go through 10 years of statements to work this out…. Imagine an industry that is only controlled/motivated by compliance to regulation, not competition and innovation to attract or retain customers…. Wow.

So go through 10 years of statements I did and here are some of the nuggets of super fund greed I found. I need to add to this that I had never changed anything in my Super account apart from changing my asset allocation to 100% cash in 2012. Everything that has happened below is somehow the default option…

  • My fees had steadily increased from $70 per year to $700 per year…
  • Included in this was insurance costs (which I never requested) which had risen from $57 per year to approximately $500 per year…
  • In 2011 they swapped from a yearly statement to a 6 monthly statement, no doubt this made the fee numbers look less as they were only over a 6 month period. This worked for a short amount of time until they happened to increase past what they had been for the 12 month cycle…
  • I started off having a life insurance policy for $90,000, by the end of the 10 years I had a life insurance policy for $412,000 and income protection insurance of $3,000 per month, all without asking for any insurance at any time, apparently the default option must include ever increasing insurance cover…
  • Approximately $51,000 of contributions had been made, but after fees and taxes on returns the balance is $46,466… Over 10 years I have actually lost a good wad of money, mostly through ever increasing fees… (Approximate as roughly $1500 was contributed before 2006, but it’s hard to be precise as there are no records of this..)
  • My 100% cash asset allocation has returned the dismal rate of 1.89% over the last year (this is probably less right now as interest rates have gone down) compared to a rate of 2.87% currently easily available on a plain old Ubank Usaver Ultra account…

And here it is in graphs:

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So what’s the explanation for this rampant gorging of fees by VicSuper?

Does VicSuper (probably all other Super Funds as well) think that their members will treat their Super money as money that isn’t theirs,  if they get some (any) at retirement they treat it as a windfall, rather than money they actually worked for and invested over a long term? Is the apathy of most people towards their Superannuation really that great? I know in my case it has been..

Or do they think that over a long term gradually increasing fees will go unnoticed, similar to the anecdote about boiling a frog to death?

Surely they have complied with all regulations, but how can it possibly be in my best interests to buy ever increasing amounts of insurance with my hard earned Super money? How is this allowed to be the default position?

I’ve now stopped all insurance payments from my Super fund. In general insurance is a tax on people who are bad at math, and why on earth would I need a payout if I die? I’d much rather a theoretically $120,000 greater sum in my Super at retirement as mentioned above.

 

The next step on my path to not being a Sucker is to look into some kind of Self-Managed Super Fund, with low compliance fees.

 

And how about you? If you can answer all the questions at the start of this rant correctly, bravo, well done good Sir, you are smarter, more sophisticated and probably a better lover than I.

If not, then it’s time to face facts that you are actually a Sucker. Take control of your money Sucker, strike back at the full moist leach that is the Australian finance industry, sucking on the blood and sweat of workers like you in other more productive Australian industries.

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