How to get your gouged super back

Did you know you have a one-in-three chance that you could be owed thousands of dollars?

It’s true.

This week law firm Slater and Gordon announced they’re launching Australia’s biggest class action:

“The Royal Commission into banking has revealed that if you’ve been a member of a big bank-owned superannuation fund (or AMP) then your retirement savings may have been gouged for years. We believe you can and should get your super back.”

Giddyup!

In fact Slater and Gordon reached out to me personally this week to see if I would “promote this to my networks”.

Consider it done!

So, what do I really think?

Well, I think if there’s a group I trust even less than finance executives … it’s ambulance-chasing lawyers.

(Never get between either of them and a bucket of your money.)

And so with “clowns to the left of me, jokers to the right …

Here I am, stuck in the middle with you.”

Slater and Gordon are suggesting there are five million Aussies who have been shafted by their retail super funds (my words), for a total of up to $1 billion (their words). They’ve set up a website where you can register to getyoursuperback.com*

*Less their hefty legal fees, of course.

And if you genuinely believe you’ve been screwed ‒ most notably because you’ve invested your super in low-earning cash options (though I simply can’t believe that can be too many people?!) ‒ well, yes, you should sign up to the class action.

After all, why not?

“Ya got to be in it to win it, son”, advises Bluey at my pub (a man who admittedly will drink from the drip tray because he’s so broke from punting.)

However, let’s get a few things straight.

First, there is nothing new about bank-owned funds underperforming their peers. Since super began, AMP and Commbank (and other bank-owned retail super funds) have, on average, charged high fees and delivered members low returns.

(In fact, I wrote about it in 2016 in my book. An old bloke named Frank, from Bendigo, was (legally) gouged with fees by AMP for tens of thousands of dollars over his working life. I suggested the least he could do was to ask the AMP CEO to mount a plaque at AMP HQ’s toilet saying “This urinal was paid for by Frank from Bendigo’s super”.)

Second, paying high fees on your super is the easiest way to rob yourself of a secure retirement.

Yet get this: around 82 per cent of the Aussie market is invested in high-fee, actively managed funds, rather than in the low-fee index funds I recommend.

How’s that working out?

“Active fund managers let investors down”, was the headline in the Australian Financial Review this week.

“Most Australian active fund managers in a majority of categories failed to beat their benchmarks in 2017‒18, lending more ammunition to the case for passive [index] investing.”

Vanguard’s Robin Bowerman said: “I don’t think anyone is surprised by the results. Active underperformance is less about the investment style and more about the high costs. In investing, the more you pay, the less you get.”

Touché!

So, my final piece of advice is this:

By all means join the class action if you think you can claw back some money.

But that’s all in the rear view mirror.

For the future, keep your eyes on the road and your hands upon the wheel.

Don’t rely on the regulators, or your super fund, or lawyers, to look after you.

Instead, do what Frank didn’t, and ask your super fund whether you’d be better off having your money invested in low-cost, passively managed index funds.

Tread Your Own Path!