In case you hadn’t noticed, we like metaphors here at SuperSavvy. We especially like automotive metaphors. So bear with us while we use another one.
If you accept that superannuation is a long-term investment (and if you don’t, see us after class), then imagine for a moment that saving toward your retirement is a journey. A long journey.
We’d all like to think that we simply turn onto a freeway at the start of our super journey, set cruise control and enjoy the trip to our retirement. But that’s rarely, if ever, how it pans out. Like lots of long journeys, we have learnt from experience that the trip we imagined and the trip we end up taking are often wildly at odds. Super, like driving, throws up many different road conditions. Some great, some ho-hum and some we’d rather forget. With luck, in the journey that is super, we get to spend a fair bit of time on a three-lane freeway, accruing lots of lovely savings along the way (think of them as souvenirs, if you like). But every now and then we get stuck in traffic and slow to a crawl. And every six or seven years, we hit horrendous conditions that can force us into reverse.
That’s what happened recently in the huge pile-up that was the GFC.
Now, we have seen a recovery that’s producing positive returns that are as surprising in their own way as the GFC-period negative returns were dispiriting.
The March returns show a result that, if they continue through June
will see double digit growth for 2009/10 and the fifth double-digit year in seven - a record.
BUT ... (and you must have known we’d throw in a but) The fact that most super funds are back on the freeway, pedal to the metal and cruising along at 110 kmh is completely irrelevant if you’re on the side of the road in a broken down Lada Niva.
We’ve said it before - but in different language - and we’ll say it again: If you’re not driving a supercar, what the hell are you doing? If you haven’t done it already, get out of the Lada and into the Lamborghini. Why?
The best performing of all Balanced options recorded a massive 33.4% return over the past year. The worst continued to roll backwards, losing almost 3.9% in the same period. Obviously, if your money’s in the former, you’re well on the way to recovering GFC losses. If you’re in the latter, you’re losing more and more ground every day.
It’s not just performance gaps that are critical here, either. Fees vary wildly. So too do insurance rates.
Time to act. First stop is the new Savvy Supermarket. Have a look
around. See what funds we rate highly. These ratings are based on a thorough analysis of a fund’s performance, management, investments, fees - basically everything that contributes to a fund’s
delivery of value to its members.
Read the Savvy team’s reviews (we’re adding more regularly). These are a more personal view of a fund - with particular emphasis on its appeal to different age groups.
Download the Fundamentals reports. They’re a convenient summary of a fund’s strengths and weaknesses.
Without too much trouble you’ll have soon identified the fund you want to be in.
Here’s the really neat feature of the new Savvy website. You can now download a Product Disclosure Statement for your selected fund. And finally, you can download a rollover form. The fund will take care of the rest.
How important is the right choice of fund?
If you can save 1% on the fees you pay, you can easily add 30% to your super balance over your working life.
If you average 4% p.a. better returns than you’re getting now, you
might even consider retiring early.
Both of these outcomes are surprisingly easy to achieve. Check out the Savvy Top 10 funds for performance, fees and insurance to see who the stars are. The Number 1 fund for Fees is less than half the fund in the Number 10 spot, saving you over $200 a year. The Number 1 fund for Performance (in Balanced 60-76 options) returned 7% over 5 years, a full 1% better than Number 10 - and streets ahead of the worst performer.
For heaven’s sake, if your fund’s a Lada, it’s time to trade it in. Whilst the GFC proved that ALL funds can go backwards, the recovery proves that only the best funds have the grunt to make the most of great conditions.
Disclaimer: SuperRatings Pty Limited holds Australian Financial Services Licence No. 311880. This release has been prepared for the purpose of providing general advice only and has not considered the recipients objectives, financial situation or needs. The recipient should consider obtaining independent advice before making any decision about a financial product referred to in this report and should obtain and consider a copy of the relevant Product Disclosure Statement from the product issuer.