Australians' retirement savings have delivered a net
return of just 3 per cent a year over more than a decade, an
investigation by the ABC has found.
That is barely ahead of inflation which averaged 2.8 per cent over
that period and 3.1 per cent over the past 10 years - implying that,
system-wide, retirement savings have achieved virtually no growth in
"It's not just bad for people's pensions," said Dr Mike Rafferty, an
economist from the Workplace Research Centre at the University of
"At a 3 per cent return it's an absolute economic travesty, because that money could be put to much better use."
The ABC has analysed official statistics from the Australian
Prudential Regulation Authority (APRA) on superannuation assets and
contribution flows that go back as far as 1997.
In the 13 years to mid-2009, the superannuation system delivered an annual compound return of 3.04 per cent.
The system-wide returns are significantly less than the money could
have earned had it been placed in effectively risk-free investment
vehicles such as Australian bank term deposits or Australian government
Cash in a bank term deposit would have delivered about 4.5 per cent a year on average over that time.
Ten-year Australian government bonds would have delivered an average return of 5.75 per cent.
The extremely poor returns on workers' money garnished under the
superannuation guarantee charge raises serious questions about
superannuation's efficacy as a vehicle for retirement savings.
The ABC's analysis shows that although the total assets in the
superannuation system have almost quadrupled since 1997, the vast bulk
of the growth has merely come from net contributions - workers' money
going into the system - not the money making money.
"As an economist I think I would say it's a scandalously inefficient
way of delivering retirement security," Dr Rafferty said, adding "and
it's also a scandalously inefficient way of saving money at all".
Returns on the major balanced super funds (with a mix of Australian
and overseas shares, property, bonds and cash) have delivered an average
return of about 4.5 per cent over the past decade, according to
credible superannuation analysts such as SuperRatings and Chant West.
In practice, that translates into a median return barely ahead of
inflation for so-called retail funds run for profit which tend to charge
Returns have been significantly higher for industry, corporate and
public sector superannuation funds not run for profit and with lower
But the returns on so-called major balanced funds - low as they are -
mask the far poorer performance for the superannuation system as a
The system-wide returns are dragged down by funds with very high fee
structures, poorly performing schemes and tens of millions of lost or
inactive accounts that no longer attract contributions that continue to
have their balances eroded by annual fees.
Volatile markets and a perfect storm of financial crises have brought down the returns on superannuation.
The period in question was bookended by the Asian financial crisis
and the global financial crisis and punctuated by the tech wreck of 2000
and the market ructions in 2002-03 from the accounting scandals at
Enron and WorldCom.
But market volatility cannot be entirely blamed for the poor returns -
someone investing their money in Australian equities over this time
would have achieved an annual return more than double inflation at 6.6
The returns have also been eroded by a sizeable slice of fees taken from superannuation all the way along the line.
"It's a $1.2 trillion industry and out of that there is about $17
billion in fees that are stripped out of it every year," said Jeff
Bresnahan, managing director of SuperRatings.
"Quite simply, $47 million, $48 million a day coming out of our
superannuation accounts to pay suppliers for managing that money."