My super experience was a huge disappointment
I opened a new superannuation account. And was ripped off. It made me angry and I opened up my editor to write this blog post as a warning for others.
A government mandated scam
I consider myself fairly computer savvy, and read most of the fine print - most of the time, yet here I was the victim of a scam. Not just any old scam, a government mandated scam. You see, we don’t get a choice whether or not we have superannuation, everyone earning income must have these benefits paid by their employer. Even if you are your own employer and don’t want to. While researching for this post, what I found wasn’t as bad as I first thought. In fact, it was pretty good. So I’ve changed my mind about superannuation, here is the story.
Last minute signup
Last financial year, I found that I must make payments to my own super account, because I employ myself even though those payments are “directors fees”. I discovered this 2 days before the end of financial year just before I was getting ready to make my director fee payments. Simple. I’ll just make a payment to my existing superannuation account. Not so. In order to make the payment it was going to take a week’s worth of paperwork. Why can’t I just sign up online as an employer? Anyway, I signed up with another fund, because I’m already listed as an employer there. I made the payments and thought that would be it.
Then I get a letter in the mail
I get a welcome pack in the mail a few days later. It congratulates me on signing up and informs that my life insurance, income protection insurance and total permanent disability insurance is all set up and the fee is being debited per week. Wait. I didn’t ever consent to paying for life insurance! And I certainly don’t want to buy it from my super provider for $9/week. Imagine that, every week for the rest of my working life paying $9 for something I didn’t want!
Any insurance should be off by default
This is what made me the most upset. Luckily opting out was easy enough through their website. But I thought it should have been opt-in to begin with. $9/week was the price for all three insurances. This particular super fund has almost 2 million members. The fat cats in the super fund office must be rocking back and forwards in their ergonomic chairs laughing while pressing F5 on their keyboard to refresh their ever high climbing bank account totals.
But sadly this part isn’t true. I wasn’t able to find a single insurance package for a lower price that had the same level of cover. It seems like they do cost around $9/week for those three insurances. Ok, so they aren’t ripping me off on the insurance prices. Sure they’d get a kickback from whoever they deal their insurance with, but they aren’t gouging on price which is nice.
By now I was looking for an excuse
Then I considered that superannuation itself is a rip off. They charge admin fees, investing fees and performance fees even though they rarely perform well and could never hope to beat the stock market, or even keep up with it. What I found next was suprising.
Consider a hypothetical investment of $50,000 left to sit in your super fund under the “bonds” option compared with the same amount invested in an actual industry based bonds fund.
- For the super fund, 0.31% fees + 0.11% admin fees (yearly)
- For the industry based bonds fund 0.7% (yearly)
The industry based fund is 0.28% more expensive than the similar fund inside the super scheme. Well that was a pleasant finding. Perhaps I’ll leave my money in super after all.