More needs to be done to protect Australians in low-performing super funds after 850,000 customers were found to have lost a collective $1.6 billion in superannuation in a year.
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The figures, released after analysis by Industry Super Australia, show about 90 per cent of customers who belonged to 13 under-performing super funds, did not switch to a better performing product when advised.
The performance test on those 13 funds was first undertaken in 2021 by the Australian Prudential Regulation Authority (APRA) as part of the then Coalition government's Your Future, Your Super reforms.
The test reviewed investment returns by default superannuation funds.
Industry Super Australia (ISA) chief executive Bernie Dean welcomed the reforms and the accompanying 'stapling' laws, that help people carry a super fund from job to job, but said the reforms should be taken further by the new Labor government.
"Performance tests that identify under-performing funds, and stapling laws; which stop people from ending up with multiple accounts with [multiple] sets of fees ... We're supporting those two things," he said.
"But the government needs to go one step further and link the two so that people don't end up getting stuck in a fund that has failed the test.
"I personally think that is a sensible, not unreasonable step for the government to take."
On June 7 the government announced there would be a review of the Your Future, Your Super test. The consultation period for the review closed on October 14.
A spokesperson for financial services minister Stephen Jones said he was considering submissions.
"The Albanese Government will always look for ways to strengthen Australia's world-class superannuation system and benefit fund members," the spokesperson said.
"The purpose of the review is to explore unintended consequences arising from the initial phase of the Your Future, Your Super performance benchmark regime."
ISA manages eleven industry-specific super funds.
After a 2021 performance test, LUCRF Super, managed by ISA, was merged with better-performing ISA fund Australian Super.
Two other funds that failed a performance test in 2021 have or will soon merge with other products, but the remaining eight are still operational.
The results of a second test were released in August 2022, and five products were found to underperform. Four of the five had underperformed in the test for the second year in a row.
Both the 2021 and 2022 performance tests looked at low-cost, default superannuation funds, called MySuper products, which most people are placed on when they enter the workforce.
The tests did not include Choice super products, which are funds a person needs to actively choose to join.
ISA has also called for the expansion of the performance test to include Choice super products.
In a letter seen by ACM to one customer of a fund that failed the 2021 test, the advice to switch to a better performing product was clear.
"'Your superannuation fund [product] has performed poorly under an annual performance test that was introduced by the Australia Government to make sure Australians are getting the most out of their super. As a result, we are required to write to you and suggest that you consider moving your money into a different superannuation product'," the letter read.
"'Switching to a different super product is easy, and there are no fees involved.'
"By switching into a better performing product, you can potentially save thousands of dollars more for retirement. For example, by earning 1 per cent higher return over a 30 year period, you could by 20 per cent better off at retirement.'"
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On average, customers that did not switch after the 2021 performance test each lost $1,900 from their super.
According to ISA, this meant a person on a median wage who stayed with an under performing fund for another 10 years could lose $25,000 and a 30-year-old who stayed with an under performing fund for the rest of their working life could lose $225,000 from their super fund by retirement.
University of Melbourne accounting teaching fellow Warren McKeown said financial literacy and engagement with superannuation was difficult because for many Australians access to money in super seemed far away.
"That's something which is a big challenge and I think it's something which needs to be looked; at the idea of financial literacy being developed," he said.
"When a person gets a job now they're given a form about what superannuation they want their contributions put to. There's probably not enough done in the workplace about about what superannuation is.
"It's something which is so far removed that people don't focus on it [or] what the long term benefits can be," Mr Warren said.
ISA's Dean said there were a number of reasons super had been a low engagement issue and, given it was a compulsory system, responsibility to monitor funds shouldn't wholly fall to the individual.
"When you look at how much a person can be missing out on, through possibly no fault of their own, ie; they just don't open the email or don't open the envelope ... we can go, 'well actually, it's not all their responsibility, it's [a] compulsory system'," he said.
