Moving to a different superannuation fund

[Wanderer Returns]

G'day,

I haven't been that impressed with the performance of my super fund (QSuper) during the last couple of years, which seems to coincide with them merging with Sunsuper and becoming the Australian Retirement Trust. I'm not sure whether that's relevant or not, but it's just an observation.

Couple of quick questions for anyone in the know. Firstly, where can I find unbiased reviews and comparisons of the performance of super funds. Secondly, if I chose to switch products would I likely incur significant cost or penalties in doing so? Any helpful suggestions would be most appreciated - ta in advance.

[Marisawright]

1 hour ago, Wanderer Returns said:

if I chose to switch products would I likely incur significant cost or penalties in doing so? Any helpful suggestions would be most appreciated - ta in advance.

There are no costs to switch to another super fund.  You just ring the new super fund and they'll walk you through the process.   Your employer may have a rule about only changing funds at a certain time of year, so check that. 

https://www.ato.gov.au/calculators-and-tools/super-yoursuper-comparison-tool

Personally I'd stick to one of the industry super funds as they tend to have lower fees.

[DrDougster]

Interesting, I specifically kept hold of QSuper when moving to Perth. It's pretty solid. What have they done to pi55 you off?

[Ferrets]

Ditto the question.

Looking at the link Marisa shared, the ART lifecycle fund seems to be near the top of the pack, and all of our family are on that so curious if there’s something I’m missing?

Edited November 15 by Ferrets

[Andrew from Vista Financial]

Sunsuper and Q-Super merged a few years ago to become Australian Retirement Trust although they do still run two platforms and most of the Investment Options are now the same except there are still some lifestyle options available on the Q-Super platform that are not on the ART platform.

What option are you invested in, is it one of these?

 

 

 

The performance for these options have been pretty bad lately, I believe a reasonable part of this is due to material reductions in the value of some of their US office assets.

That said the ART options which I believe are all available on the Q-Super Platform have been doing very well.

It may be worth giving them a call to discuss investment options before looking to switch Super Funds, they will typically be able to offer Advice on Investment options without an additional cost to you (known as intra-fund advice).

ART are the second biggest Fund in Australia and are a not for profit fund, so fees in line with other industry funds.

They (not the Q-Super platform) are the main Platform I use for my clients due to, low fees a good range of investment options, strong performance (short, medium and long term) and receive high ratings from my primary independent research house (Morningstar). 

 

 

 

Edited November 16 by Andrew from Vista Financial

[Marisawright]

On 08/11/2024 at 13:55, Wanderer Returns said:

I haven't been that impressed with the performance of my super fund (QSuper) during the last couple of years, which seems to coincide with them merging with Sunsuper and becoming the Australian Retirement Trust.

So much depends on where you've chosen to invest your money within the fund.  Maybe worth looking at that first?

[rammygirl]

I second the give them a ring option and discuss your investments and plans for retirement. 
Same with your bank if you have savings. Ask and they can often give you a better rate. I got an extra 2% from Westpac recently. 

[Wanderer Returns]

20 hours ago, Andrew from Vista Financial said:

Sunsuper and Q-Super merged a few years ago to become Australian Retirement Trust although they do still run two platforms and most of the Investment Options are now the same except there are still some lifestyle options available on the Q-Super platform that are not on the ART platform.

What option are you invested in, is it one of these? 

...

The performance for these options have been pretty bad lately, I believe a reasonable part of this is due to material reductions in the value of some of their US office assets.

That said the ART options which I believe are all available on the Q-Super Platform have been doing very well

Hi Andy, thank you for your reply.

Yes, I'm in the Lifetime Focus option, which as you pointed it out hasn't performed very well in the last 3 years, although it has redeemed itself someone in the last year...

 

I'm not sure whether the ART options are available from inside the QSuper portal. Here's a screenshot of all the funds that are available to me to invest in...

[Wanderer Returns]

On 15/11/2024 at 16:56, DrDougster said:

Interesting, I specifically kept hold of QSuper when moving to Perth. It's pretty solid. What have they done to pi55 you off?

 

On 15/11/2024 at 18:51, Ferrets said:

Ditto the question.

Looking at the link Marisa shared, the ART lifecycle fund seems to be near the top of the pack, and all of our family are on that so curious if there’s something I’m missing?

 

20 hours ago, Marisawright said:

So much depends on where you've chosen to invest your money within the fund.  Maybe worth looking at that first?

Thank you for the feedback everyone.

Yes, I had a look at the link Marisa shared and I was surprised to see that the performance of some of the ART funds have been pretty good.

When you're 50, QSuper automatically moves you into a different fund (Lifetime Focus), and that's been the issue. This fund hasn't performed well at all in the last 3 years, as I mentioned in the reply to Andy above. I guess I need to be a bit more proactive, and switch my investment into a different option within QSuper. Either that or head down to the casino and stick it all on my lucky number!

[Marisawright]

56 minutes ago, Wanderer Returns said:

When you're 50, QSuper automatically moves you into a different fund (Lifetime Focus), and that's been the issue. This fund hasn't performed well at all in the last 3 years, as I mentioned in the reply to Andy above.

Has it actually made losses, or has it just been low-earning?  Maybe that's because it's focussed on preserving your capital.   

When you're young, you can afford to make riskier investments because if there's a stockmarket collapse, you've got time to rebuild your wealth.    Once you're over 50, you don't have enough time left to rebuild from a loss -- so that's why QSuper switches you to a more cautious suite of investments.  Of course it's up to you to decide how much risk you can afford to take, based on how long you expect to be working and how much other wealth you have outside super.

Edited November 17 by Marisawright

[Wanderer Returns]

7 hours ago, Marisawright said:

Has it actually made losses, or has it just been low-earning?  Maybe that's because it's focussed on preserving your capital.   

When you're young, you can afford to make riskier investments because if there's a stockmarket collapse, you've got time to rebuild your wealth.    Once you're over 50, you don't have enough time left to rebuild from a loss -- so that's why QSuper switches you to a more cautious suite of investments.  Of course it's up to you to decide how much risk you can afford to take, based on how long you expect to be working and how much other wealth you have outside super.

It's made on average 3% but then inflation has been around 4-5% over the last 3 years, so in real terms it's a loss. I get what you're saying about them switching us into less risky investments at a certain age, but it seems a bit over-cautious unless you're about to drop off the perch imminently.

I'll probably stay QSuper but I'll consult them about different investment options as suggested, and might also get independent financial advice too. Ta.

[Andrew from Vista Financial]

Hi

Yep they are the same, 8 diverfisied options and 7 single asset class option options.

 

 

Edited November 17 by Andrew from Vista Financial
spelling :)

[Andrew from Vista Financial]

So with these lifecycle options they do as Marisa mentions gradually shift from growth assets to defensive assets however this is not the reason (in this case) for the lower returns in comparison to other diversified options with similar growth v defensive asset splits.

This option has been benchmarked to a Growth Profile (meaning 70% Growth and 30% Defensive) and has underperformed category over the last year as well.

As I suggested earlier I believe a bg part of this is due to their exposure to US property (this falls in the 23% to unlisted assets and alternatives) as there have been big write down in this space.

 

 

Edited November 17 by Andrew from Vista Financial

[Andrew from Vista Financial]

It's worth noting that even the largest and third-largest super funds (in their default options, which are not lifecycle/stage options) have significantly underperformed benchmarks and their respective categories over the past year.

This underperformance largely stems from the same issue faced by QSuper and many other industry funds: a heavy allocation to unlisted assets such as private equity, property, private credit, and infrastructure.

In contrast, listed shares—both Australian and international—have been the key drivers of returns over the last 12–18 months, which explains the disparity.

And, as always (it has to be said): remember that past performance is not an indication of future performance!

 

 

 

 

 

[Wanderer Returns]

On 18/11/2024 at 09:39, Andrew from Vista Financial said:

Hi

Yep they are the same, 8 diverfisied options and 7 single asset class option options.

Thank you again, Andy. I've now found the above information, although it's not readily available on the QSuper website. They only show the performance of their lifetime options, and you have to follow a link through to the ART website. I think it's a little misleading of QSuper tbh. It's as though they want you to stay invested in their poorly-performing funds.

I can see the ART funds have, on the whole, performed better than the QSuper ones. As you mentioned, past performance... etc, but I think I need to be a little more adventurous with my investment strategy so I'm not still working when I'm 100! Thanks for pointing all this out.

[DrDougster]

The idea that risk/consequence changes as you age is a logical fallacy pedalled by financiers the world over 

Few of them have taken the time to question what they have been taught. 
 

Go all in

[Marisawright]

50 minutes ago, DrDougster said:

The idea that risk/consequence changes as you age is a logical fallacy pedalled by financiers the world over 

As I understand it, the logic is that you can afford to take big risks while you're working, because if there's a crash, you have the money and time to  rebuild your nest egg again.   Whereas if  you're a few years from retirement and there's a crash, you've got no money coming in, so you've got nothing to invest to rebuild your nest egg. 

Where's the flaw in that argument?

[DrDougster]

8 hours ago, Marisawright said:

As I understand it, the logic is that you can afford to take big risks while you're working, because if there's a crash, you have the money and time to  rebuild your nest egg again.   Whereas if  you're a few years from retirement and there's a crash, you've got no money coming in, so you've got nothing to invest to rebuild your nest egg. 

Where's the flaw in that argument?

It’s fundamentally flawed based on risk, consequence and reward. 
You “understand it” as you do based on a career in finance rather than philosophy or social evolution. And, in this equation a lack of time multiplying. If you’re 60 you can probably only toss up a quarter of your life in the Melbourne Cup. The idea that it is sensible you should take more risk with half your life when you’re 40 is for the birds. 
It is crazy that the financial industry doesn’t understand this simple strategy. 

[Ausvisitor]

One side to the story there, but anyone who retired in 2020-2022 is very happy their Super moved them to non volatile options later in life as most worldwide pension funds invested in stocks and shares took a 20% battering over COVID.

Those in the cash heavy funds didn't.

And whilst it's ok for an individual lie yourself to say "I'm happy with the ris" it isn't a smart thing for an industry to impose that as a default on a huge cohort of aged persons.

 

(For what it's worth personally I agree with you, but I know plenty people who wouldn't understand the risk they are taking if the super funds didn't do this and we'd see more aob stories on TV  begging  the government to help out because the super funds ruined their retirement)

[Marisawright]

8 hours ago, DrDougster said:

It’s fundamentally flawed based on risk, consequence and reward. 
You “understand it” as you do based on a career in finance...

No, I didn't have a career in finance.  I worked in the insurance industry and a few banks on the administration side.  As you say, my understanding is based on the conventional wisdom that I've read about when trying to learn about how to manage my retirement. 

I think what you're saying is that you should never take big risks, because the downside at 40 is the same as the downside at 80?  Or am I missing a point?

Edited November 26 by Marisawright

[Blue Manna]

3 hours ago, Ausvisitor said:

One side to the story there, but anyone who retired in 2020-2022 is very happy their Super moved them to non volatile options later in life as most worldwide pension funds invested in stocks and shares took a 20% battering over COVID.

Those in the cash heavy funds didn't.

And whilst it's ok for an individual lie yourself to say "I'm happy with the ris" it isn't a smart thing for an industry to impose that as a default on a huge cohort of aged persons.

 

(For what it's worth personally I agree with you, but I know plenty people who wouldn't understand the risk they are taking if the super funds didn't do this and we'd see more aob stories on TV  begging  the government to help out because the super funds ruined their retirement)

Although cash and bonds, the safe strategy have been hammered by rising interest rates and inflation, whilst the risky shares have done well. Obviously this may change at some point in the near future. But safe isn't always safe and risky isn't always risky.

[Ausvisitor]

11 hours ago, Marisawright said:

 

I think what you're saying is that you should never take big risks, because the downside at 40 is the same as the downside at 80?  Or am I missing a point?

So I don't think this can be what any person with any understanding of compound interest would believe.

Let's take two hypothetical scenarios. In both cases you turn 40 with $300k in your super account. Every year the super makes 6% and you put in $600 each month (after taxes and insurances)

In the first scenario the funds your super is invested in have a 20% hit on your 40th birthday leaving you with $240k - annoying, but by 67 this has grown to $1.69m

In the second scenario you don't experience any falls until the day of your 67th birthday and again this is 20%, the day before your super was worth $1.94m but on the day it crashes it settles at 1.52m

Almost a $200k worse position because the "same" risk of a crash occurred but later in the process

This is why super funds switch to less risky investments as you age 

[Blue Manna]

19 minutes ago, Ausvisitor said:

So I don't think this can be what any person with any understanding of compound interest would believe.

Let's take two hypothetical scenarios. In both cases you turn 40 with $300k in your super account. Every year the super makes 6% and you put in $600 each month (after taxes and insurances)

In the first scenario the funds your super is invested in have a 20% hit on your 40th birthday leaving you with $240k - annoying, but by 67 this has grown to $1.69m

In the second scenario you don't experience any falls until the day of your 67th birthday and again this is 20%, the day before your super was worth $1.94m but on the day it crashes it settles at 1.52m

Almost a $200k worse position because the "same" risk of a crash occurred but later in the process

This is why super funds switch to less risky investments as you age 

Yes and no.

Firstly you need to define risk. There's a difference between investing in single stocks and funds. Single stocks can become zero value, but there's much less risk that a fund will. Given time, the fund should reverse any losses. Your really trying to protect yourself from volatility.

Secondly, as you hit retirement age, you won't need all your super initially. Sure, having 20% or so in cash should be essential. At least enough cash for five years. But the rest you can scale the risk as to when you think it likely you will need it. 

So at 67 you would take a less risky stance than at 40. But that doesn't mean you should take no risk and put it all in cash or inflation could really hurt you. At 67 you could live for another 25 years.

 

Edited November 27 by Blue Manna

[Steve Elliott]

The truth of the matter is that in the longer term a diversified portfolio of growth assets significantly outperforms less risky defensive assets by a considerable amount. Having said that, risky assets are more volatile and do experience significant downward corrections from time to time. Never have these assets failed to reach and exceed the previous highs prior to the correction. However, the time it takes for the growth assets to recover typically takes several months at best, and several years at worse. Thus when we are in our 20's, 30's, 40's we still have a very long time horizon and very importantly have no need to draw an income from these assets. When we find ourselves approaching retirement, our time horizon is shorter and thus less time for volatile assets to recover. We are also approaching a phase in our investment lives where we will likely be seeking to use the investment assets to draw an income. Thus it makes sense for risk profiles to gradually shift over time towards a more conservative, less risky assets. - I hope that helps.

[Marisawright]

Thanks, @Steve Elliott, that's what I understood as the 'conventional wisdom'.  @DrDougster seems to be saying it's nonsense so I'm hoping he'll come back to explain.