Workplace: Dirt Cheap
Industrial: Daddy Doesnít Live With Us Anymore
Economics: Who's Afraid of the BCA?
International: From the Wreckage
Politics: Infrastructure Blues
History: Meat and Three Veg
Savings: Super Seduction
Politics: Popping the 'E-Word'
Poetry: To Know Somebody
Review: Off the Rails
The Locker Room
Thatís Our Team
Janetís Job No Victory
Royal Finger Lickers
Will $20 Restore Carr?
How would you like to have an extra $212,000 in the bank?
That's one question posed by research into the performance of various superannuation products on the Australian market.
Rainmaker Information analysts concluded that a worker in an industry fund earning $40,000 a year, with $10,000 accrued today, could end up $212,000 better off than someone in a for-profit arrangement.
The analysis was based on the relative performances of industry funds and the for-profit sector, over the past five years, and assumed the worker would cash in his chips in 40 years time.
It highlights the differences that can accrue from seemingly minor discrepancies over a lengthy period, especially when they compound every day of a working life.
Rainmaker's figures were based on research that showed not-for-profit industry funds outperformed retail funds, for the average working Australian, by $160 over the last 12 months, and $2500 over the last five years.
It reinforced research that showed fees charged by banks, insurance companies and financial planners were much higher than those levied by industry funds.
Independent research firm, SuperRatings, found the average for-profit (master trust) returned $2.50 for every dollar taken out in fees. For the same price, industry funds added around $8.60 to members' nest eggs.
The findings have gained widespread publicity because of the federal government's move to open up industry funds to competition from banks, insurance companies and other private operators from July 1, this year.
Industry funds were established as part of the accord between the ACTU and the Keating Labor Government to lift national savings rates and have been effective in achieving that goal.
Usually managed by a board of worker and employer representatives, they return all profits to members.
Some economists believe the vast amount of investment money at their disposal, more than $250 billion, has been an important factor in Australia's relatively strong economic performance.
That amount of money, though, is a lure for John Howard's big business constituency and worries those who believe workers' voices should not be heard in boardrooms.
The "choice" legislation is only the second major move the federal government has made on super since it was elected eight years ago. The first was to squash movements that would have taken compulsory contributions to 15 percent of annual income.
According to the ACTU, in 2004 dollars, single people will need $32,800 a year for a "comfortable" retirement. That means access to lump sums of $420,000.
If the average Aussie saves only the nine percent Super Guarantee Contribution, at current rates of return, he or she would have $167,000 in 30 years time or an annual entitlement to $19,800.
Every dollar that goes missing along the way, through poor investment decisions or fees, is important because it compounds again and again during our lifetimes
When ABC and Sydney Morning Herald commentator, Alan Kohler, compared industry funds with for-profit super he came to a thought-provoking conclusion.
"There's an awkward secret at the centre of Australia's superannuation system," Kohler wrote last August. "The socialists are winning.
"Think about this: virtually every industry fund has performed better than every retail fund since 1998 - but at the same time every industry fund costs about half of every retail fund because there's no need for a profit and those managing them earn smaller salaries."
Getting the Message?
From July 1, banks, insurance companies and financial planners will have access to the accounts of an extra four million working Australians. Choice of Fund legislation won't apply to workers covered by state awards, certified agreements of AWAs that specify a fund but all new employees must be handed a "standard choice form" within 28 days of starting. The choice legislation over-rides default funds in federal awards.
The Feeding Frenzy
We can't tell you where you will find most satisfaction but we can warn you what to look for when a member of the quick buck brigade is prowling, and what his tactics could be...
Will He Respect You Tomorrow?
Hidden fees are the specialty of this smooth talking individual. Remember, when someone's only after one thing, you won't necessarily hear the full story.
Hidden fees can wreck your plans. Last year, one industry fund member tried to move her $2,104 account and was confronted, by a bank, with a demand for $1,234 for the privilege. Another financial institution came up with a $10,114.44 exit fee on an investor.
Another silver tongued devil out to woo you and screw you.
Honeymoon rates are the oldest trick in the book, luring people into relationships by not coming clean on the long-term ramifications. He'll tell you what you want to hear but the truth will come out once the deal has been consummated.
This bloke's up-front fees are competitive but your costs are loaded onto the back-end of the deal. He's almost encouraged by Choice of Fund legislation that only requires suitors to disclose their intentions for the first year.
Honeymoon rates have been remarkably successful in the home mortgage sector where many Australians have signed up for products that will cost tens of thousands of extra dollars in the long run.
Just a Gigolo
Trail commissions can be the sand in the knickers of a super relationship. Just when you think you've finally got on top, this fellow will keep nibbling away at your nest egg.
Trail commissions are the lifeblood of financial planners, they're how they finance their lifestyles. They might not seem dramatic in the heat of your first encounter but over a lifetime they can skim the cream off your plate.
Dressed to Thrill
Straight from the big end of town, Flash Freddie's got the firepower to turn your head. He's unlikely to knock on your door in person but, sure as eggs are eggs, you will find him in the living room and even laid out, most attractively, on the breakfast table.
Fancy marketing is the seduction technique of banks and insurance companies under pressure to return dividends to shareholders. Not all are up to no good, not by any stretch, but they've got deep enough pockets to fund an advertising orgy.
When you get your invitation, peel back the wrapping and check out the fine print.
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