Ethical Superannuation Australia: Is It Just a Greenwashed Rip-Off?
Want to save the world with your superannuation? Make sure you check the fees first. Here is why outsourcing your ethics to a high-fee fund could cost you $100,000.
A friend recently asked me to take a look at Australian Ethical Super for their retirement savings. After digging into the numbers, I wasn’t very impressed. Sure, it might feel warm and fuzzy to invest ethically, but does ethical superannuation in Australia make sense for your future wallet?
Here are two reasons why you should think twice before joining high-fee ethical super funds:
1. The fees are eye-wateringly high: The Australian Ethical MySuper Balanced option charges total fees of 1.134% p.a. By comparison, one of the cheapest super funds in Australia, the Hostplus Indexed Balanced option, charges just ~0.11% p.a. Using the Moneysmart superannuation calculator, that tiny percentage difference adds up to about $100,000 less in retirement by age 67 for a 30-year-old earning $100,000 a year. That’s a massive fee penalty to pay for outsourced ethics.
2. Below-average investment performance: You’d hope that paying premium fees would get you premium returns, but their 10-year performance of 3.7% sits well below the industry average of 5.35% (according to SuperRatings). You are paying more to get less.
If you want to support green energy and avoid fossil fuels, you can easily select low-cost socially responsible (SRI) index options within major industry super funds for a fraction of the cost, or invest your own cash directly into ethical ETFs. Is losing $100,000 of your retirement nest egg really worth it to outsource your ethics to a manager?
