Industry super funds continue to beat retail super funds

Bank-owned retail funds underperform industry funds yet again

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Not-for-profit industry superannuation funds have thrashed retail super funds last year according to Chant West research.

Industry not-for-profit filled every single one of the top ten spots. The median return for industry funds was 6.7% to members, compared to 5.2% for retail funds. Since 2006, industry funds have outperformed their retail counterparts 7 times, with one tie and retail funds winning in just two years (2009 and 2012).

Source: Chant West
Source: Chant West

It’s yet another reason for Australians to avoid the retail super fund industry, with the most likely reason for the outperformance the higher average fees retail funds charge. If you had invested $100,000 in an industry super fund back in 2006, you’d be close to $18,000 better off than if you had invested $100,000 in a retail super fund over the same period – as the chart below shows.

Source: Chant West (my calculations)

Source: Chant West (my calculations)

That’s just for 10 years, but over a lifetime that saving could amount to hundreds of thousands of dollars missed out on.

Industry Super Australia chief executive David Whitely has told Fairfax media, “the data highlighted the ongoing underperformance of bank-owned super funds.

The big four Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB)Westpac Banking Corp (ASX: WBC), and AMP Limited (ASX: AMP) dominate the retail managed and super fund industry. But their performance over many years has been proven to be below that of industry funds, and they often charge much higher fees.

Data released by SuperRatings confirms the relative outperformance of industry funds versus retail funds.

Foolish takeaway

We’ve said it many times before, and will likely say it many times again – Australians who want a better retirement are much better off investing in industry super funds than retail super funds.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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