Not smart, Dr Pilkington

Sally Rose writes in the Age: PhD Graduate demands the right to choose

“Dr Rhiannon Pilkington is the first to admit she is no superannuation expert.

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After advice from an adviser in the Aon group Dr Pilkington had rolled all her super into one Aon account, which she would prefer her super get paid into. (Out of the default fund, Unisuper)

UniSuper’s balanced growth option ranked as the fourth-best performing fund in the category over the past 10 years and fifth in 2015, with a gross annual return of 7.6 per cent.”

Dr Rhiannon Pilkington has probably paid a commission to the Aon advisor and will probably be paying 1% of her invested balance each year in fees.

That’s not a lot on her current balance  ($300 a year) but after she’s been in the fund for another 30 years, paying 17% of her salary (The normal rate for university employees), the superannuation balance could be as high as $1.5 million which means she could be paying well over $15,000 each year in fees to Aon (and possibly even a trailing commission to the advisor) whereas the fees to Unisuper are probably around $500 a year.

Dr Pilkington is right that people should be able to choose which superannuation fund they invest in. But investing in a fund which employs, or pays a commission to, your advisor is probably not the smartest thing to do.

The difference between retail and industry funds is very simple.

Industry funds keep their fees to an absolute minimum and invest all of their investment gains back into the members’ funds. Retail funds pay a dividend to shareholders and then put money back in the members’ funds.

The dividends that go to the retail funds shareholders come out of Dr Pilkington’s superannuation fund.

 

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