Everyone wants to retire as comfortably as possible, with as much money as possible.
- Michelle Bradley-Smith switched from an industry super fund to a retail fund after being cold-called by a financial adviser
- Ms Bradley-Smith says she started losing so much money she switched back to her industry fund
- Greg Halloran has eight super accounts and is paying for disability insurance on five of them
There are some obvious traps to avoid that could potentially save you tens of thousands of dollars.
The banking royal commission highlighted some of the problems with super funds, especially retail funds which have to serve the interests of investors and shareholders.
But fund holders must also pay attention to what is happening to their super.
The lure of bigger returns
In early 2018 Michelle Bradley-Smith received a cold-call from a financial adviser from a company called Smart Solutions.
“They were very persuasive,” she told 7.30.
“It was like I couldn’t get rid of them. Just very smooth talking.
“Just made me want to change.”
With just $120,000 in her industry account and closing in on retirement, the adviser convinced Ms Bradley-Smith to move her superannuation out of her industry fund and into a higher-risk AMP account.
“He said that his company could make me another $24,000 as opposed to what the company I was with at the time could make me,” she said.
“And it just sounded like $24,000 extra when I only had seven years of work left. It sounded good.”
When the banking royal commission began repeatedly calling out AMP’s behaviour last year, Ms Bradley-Smith realised she had made a terrible mistake.
“I started to get really alarmed. They didn’t tell me about any risks at all,” she said.
Ms Bradley-Smith had paid more than $4,000 upfront to transfer her money and committed to thousands of dollars more in annual fees.
Over the next six months she watched her super balance shrink.
“After them telling me that they were there to make me money, I lost … $7,000 and that’s not what I was there for,” she said.
“I thought, ‘I’m going to be losing money. By the time I’m 67 I might not even have $100,000’.”
After being contacted by 7.30 about Ms Bradley-Smith’s situation, a manager at Smart Solutions committed to immediately refund her fees.
She also switched her super back to her old industry fund.
But the experience has left Ms Bradley-Smith wary.
“Be very careful where you put your super. Be very careful,” she said.
Smart Solutions declined to respond to questions from 7.30.
About a third of Australian super accounts, approximately 10 million, are what are known as “unintended multiples”.
Despite concerted campaigns, nearly 40 per cent of all Australians still have more than one super account.
Greg Halloran, 50, is well aware of the problems that can create.
He has worked since he was 15, mostly in the mines, but as he moved from job to job he accumulated multiple super funds, meaning more fees and less money for him in retirement.
“I’ve accumulated about eight super accounts in my working history,” he told 7.30.
“You work for a company, then you might move to the next company and they say, you know, we prefer to have this super.”
Josh Mennen, a lawyer with Maurice Blackburn, said Mr Halloran’s case was not unusual.
“Like most Australian workers, Greg has not been engaged with his superannuation,” Mr Mennan told 7.30.
“As he’s moved from job to job he’s become a member of a new superannuation fund. And he has not consolidated his existing funds into a new fund as he has moved.
“That has resulted in obviously higher fees and, ultimately, that will compromise the amount of money that he has at retirement.”
And that is exactly what has happened.
“I don’t have that nest egg because most of it’s been chewed up by fees,” Mr Halloran said.
Most superannuation accounts come with life insurance and total and permanent disability insurance.
Combined with multiple accounts, that can become a problem.
“One in four Australians are not aware whether or not they have life insurance through their superannuation,” the Productivity Commission chairman Michael Brennan told 7.30.
“And one in six have duplicate accounts, which means they’re paying premiums on more than one account.”
That may not seem to matter, but there is a catch.
“They can’t fully claim on both [accounts],” Mr Brennan said.
“So it is important that insurance be more fit for purpose.”
It is not just life insurance that eats away at super balances.
Mr Halloran was paying for disability or loss of income insurance on five of those multiple accounts.
“If anything goes wrong, at least you know they’re going to look after you,” Mr Halloran reasoned.
Four years ago something did go wrong.
His arm was injured while operating machinery and he had to stop working permanently.
But only two of Mr Halloran’s five policies have paid out.
“They took my money for years and years and years, and now the time I need them they’re not there for me,” he said.
“It annoys me because you’re paying, you know, in that case $650 a month to be covered if anything goes wrong.
“Something has gone wrong and now they’re declining to pay.
“How many other people are they doing this to? It’s incredible.”
Watch part two of 7.30’s superannuation special tonight.