ATO's Super Funds Comparison Tool Helps People Switch Dodgy Funds | SELECTION (2023)

Last year the government launched the ATO's new Superfund comparison tool.

According to Xavier O'Halloran, director of Super Consumer Australia,The tool is a breakthrough for fund members. "The real advantage is to single out those [funds] that have passed their basic fitness," he says.

The tool allows you to compare tariffs and seven-year performance of MySuper products.

The tool has already registered more than a million hits. And there's evidence that this is having a real impact on underperforming funds - in late 2021 Australia's Prudential Regulation Authority (APRA) reported that 7% of people in an underperforming fund had closed their accounts.

That number may seem low, but analysis from Super Consumers Australia shows that this completion rate is more than double the same period a year ago.

Your experience with the tool

CHOICE member Megan found the tool to be "relatively easy" to navigate when used to compare the performance of her current and past funds.

"I chose it over other comparison tools because I trusted a government source more and didn't want to spend too much time on it," she says. "I wanted a quick answer from a reliable source."

On the CHOICE community forum, user Peterchu says the tool came in handy while helping two younger family members choose their first background.

The tool "worked well," according to CHOICE reader Lena. "It wasn't very interesting visually, but I found the low point I'm at and was relieved that it had a very good rating," says Lena. "It was easy to use overall."

What it means to you to be in a poorly performing fund

It may seem that many superfunds have roughly the same level of long-term performance, but research shows that these differences can add up. APRA calculated that the difference between a high-performing and under-performing MySuper product was $11,387, or 12.6% over seven years.

APRA calculated that the difference between a high-performing and under-performing MySuper product was $11,387, or 12.6% over seven years

APRA also made it clear that high interest rates mean you'll retire with less. The regulator has calculated that the difference between the average management fees a fund member pays for the higher-fee products is $284 more per year than for other products. It's important to remember that higher rates don't mean you're getting a better product.

Shifting your super to a better-performing fund means you can enjoy more retirement income without having to work harder or forgo it throughout your working life.

The regulator's perspective

According to APRA, the fund comparison tool is the best place to start for members who want to make informed decisions about their superfund.

Margaret Cole, a member of APRA (which leads retirement at the regulator), recently said that since the launch of the benchmark (which is part of the tool), "investment returns, fees and costs have come under closer scrutiny across the sector".

Cole says the trial will only get more intense. "Passing the performance test doesn't necessarily mean you're in clear water and under the APRA radar," she says.

In a statement on the comparison tool, the regulator said: “Increased transparency is a powerful tool for regulators to improve pension fund performance, but members must never forget that they also have the power to make decisions that improve their future retired."

products of choice

Select super products, which accounted for almost half (46%) of APRA regulated super products as of June 2020, are less closely scrutinized by consumers.

The fund comparison tool currently only lists MySuper products - it is not possible to compare Choice products. These are super products that you don't have access to by default - you have to make an active decision to join them.

Jane Hume, Secretary of State for Pensions, confirmed that the Government intends to extend the tool to selected products. It is not yet clear when this extension will take place.

Strong support for inclusion of select funds

CHOICE member Ashley says the inclusion of these products would be beneficial. "I thought it wasn't really granular enough to be useful - for example, [my specific product] just isn't listed. If I were to stick to a core investment strategy, it might be useful, but not really in my case."

Jodi, another CHOICE member, believes the tool has potential. "It seemed pretty easy to compare rates and performance," he says. However, he could not compare his product as he chooses an option other than the balanced MySuper product due to his background.

Peterchu, a member of the CHOICE community, also noted that the tool did not include his super product since it is not part of the MySuper system.

Expanding the fund comparison tool would ultimately help more Australians find a better product or have peace of mind knowing they are using a product that is doing well.

Franco Morelli, Policy Manager at Super Consumers Australia

Super Consumers Australia Policy ManagerFranco Morellisays government should fund expansion of comparison tool.

"People are using the tool and it's already showing results by increasing the number of people from poor backgrounds," he says.

"We need more transparency in the super sector. Expanding the fund comparison tool would ultimately help more Australians find a better product, or have peace of mind knowing they are in a product that is doing well in building their retirement income."

Time for effective product information on all super products

Super funds offering MySuper products are required to display a "dashboard" on their website with information about product performance and fees.

However, select product panels have been delayed by almost a decade by successive governments. There are now suggestions to postpone the panel's new requirements to 2027.

"Overwhelming and complex"

As we have already discussed,Experts say these bodies have not encouraged the exchange of funds.Dashboards are often difficult to find, and the different formats and presentations of information make comparisons complex.

A 2020 study by a group of academics found that dashboards weren't helpful in helping people compare fund performance. Similarly, the Productivity Commission found that the information reported by the funds was often "overwhelming and complex" and that most dashboards were not effective.

Clearer, simpler, and more widely applicable product dashboards are needed to help members compare the returns, fees, and risks associated with all super products

productivity board

"Clearer, simpler and more widely applicable product dashboards are needed to help members compare the returns, fees and risks associated with all super products," says the commission.

Government action required

Morelli agrees the government needs to take action to ensure consumers have the information to compare funds and make good choices.

"First, we need to make sure that the fund comparison tool includes selected products this year," says Morelli. "That has to be a priority.

"Second, it's time to review and consumer test the information that people need to make sure it's clear, simple and accessible."

This content was created by Super Consumers Australia, an independent consumer not-for-profit organisation, in partnership with CHOICE to promote and protect the interests of people in the Australian pension system.

Image bank:Getty unless otherwise noted.