When you retire, you have a number of options, including withdrawing your superannuation as a lump sum, rolling it over into an account based pension or withdrawing part of it and rolling over the remainder.
Many funds provide account based pensions that allow you to draw a regular income from your superannuation savings, whether it be monthly, quarterly, half-yearly or yearly.
At the same time, your account balance continues to be invested and any investment earnings are generally tax-free.
Canstar Research analysed the fees, returns and features of 65 account based pension products it rates and 233 investment options that have been in the market for at least three years.
Out of the 57 providers assessed, six were found to have provided outstanding value and were awarded an overall 5-Star Rating.
Account based pension outstanding value winners
AustralianSuper, Hostplus, Prime Super, Catholic Super, Sunsuper and CareSuper have been named as Canstar’s 2018 Outstanding Value Account Based Pensions.
Canstar Research weighs up the financial advice, investment options, member access such as online and phone access, beneficiary options, insurance, income payment options and a range of fees in its research when assessing this rating.
The Research team deducts administration fees, investment management fees, performance fees and other costs from the annual investment return to work out the net benefit offered by each account based pension Canstar rates.
These investment options were assessed across four profiles based on their percentage of growth assets within their investment allocation: cash (0% growth), moderate (20%-59.99% growth), balanced (60% – 79.99% growth) and growth (80%+ growth).
The 5-Star Ratings winners on average had stronger net annual returns and lower fees than the market average across all four profiles. The table below shows the average net annual return (which deducts fees from gross returns) for the wider market ranged from 2.27% for cash and 11.31% for growth, while the 5-Star average ranged from 2.61% for cash and 12.59% for growth. The winners are listed below in alphabetical order.
|Average Annual Investment Earnings and Fees – Five Years to 2018|
|Market Average||5-Star Average||Difference|
|Net Annual Return||2.27%||2.61%||0.34%|
|Fees (as percentage of balance)||0.20%||0.17%||-0.03%|
|Net Annual Return||9.60%||11.38%||1.78%|
|Fees (as percentage of balance)||0.22%||0.17%||-0.05%|
|Net Annual Return||7.54%||8.67%||1.14%|
|Fees (as percentage of balance)||0.19%||0.17%||-0.03%|
|Net Annual Return||11.31%||12.59%||1.29%|
|Fees (as percentage of balance)||0.20%||0.17%||-0.03%|
Source: Canstar Account Based Pensions Star Ratings 2018. Figures show the average of net annual return and fees over the last five financial years, 2013-2014 to 2017-2018. Net annual return figures are net of total annual costs. Fees based on a $25,000 balance and include administration fees, investment management fees, performance fees and other indirect costs. Please note that all information about performance returns is historical. Past performance should not be relied upon as an indicator of future performance. Actual returns and the value of your investment may fall as well as rise.
Canstar Research found AustralianSuper’s Choice Income account was offering consumers Outstanding Value, with relatively high returns, low fees, and a number of features which can assist consumers plan for their future.
Out of the 5-Star Ratings winners, AustralianSuper had the best returns when it came to the balanced and growth profiles while also maintaining competitive returns in the cash and moderate profiles.
Its high growth investment option had returns that were on average about 23% above the market average, while the fees averaged 26% below the market average.
Canstar Research made special mention of AustralianSuper’s competitive financial advice and education tools offered to customers such as case studies, online investment reports, a longevity calculator that forecasts how long your pension will last and video tutorials. Another key feature was that it offered a breadth of investment options that allowed customers to choose how they want their money invested.
Canstar Research found CareSuper was particularly competitive in the cash and balanced profiles, however it performed well across all four.
The CareSuperPension Balanced option’s average returns were 18% above the market average with fees averaging 20% below the market average.
This product had a wide range of features, including strong investment options such as term deposits from multiple providers, highly competitive investments on the Australian share market and access to other listed securities.
Competitive performances across the four asset profiles, in particular for cash and balanced, were partly why Catholic Super received a 5-Star Rating.
Canstar Research found Catholic Super’s MyLife MyPension’s Balanced investment options performed strongly with competitive investment returns, with net returns averaging 30% above the market average.
Canstar was particularly impressed by the fact Catholic Super’s term deposits were available from multiple providers, as well as the tools and education support it offers, such as a fund longevity calculator, newsletters, investment risk profiler and member seminars.
HostPlus performed strongly across all four profiles, including ranking second for the balanced profile and third for the growth profile.
When it came to its balanced investment offering, HostPlus had net returns roughly 30% above the market average for its Hostplus Pension Balanced investment option.
Hostplus Pension also offered some of the lowest fees and charges of all the providers rated, including unlimited free switches between investment options and no fees for withdrawals or pension termination.
Prime Super was found to have a competitive product offering for each of the four profiles considered, including ranking second and third for cash and balanced, respectively.
In the cash profile, Prime Super’s Retirement Income Stream’s cash investment impressively performed on average 35% better than the market average over the previous five years. Fees averaged 80% lower than the market average when it came to the cash profile.
This particular product also stood out to the Canstar Research team because of the feature offered to customers, including financial advice and education, strong customer access and no withdrawal and pension termination fees.
Canstar Research was impressed with the strong returns Sunsuper made across the four profiles considered and found it was particularly competitive in the cash and balanced profiles.
The Sunsuper for Life Income Account Balanced investment option’s net returns averaged 14% above the market average in the balanced profile with fees averaging 16% below the market average.
It offers a wide range of tools and advice, including pensions case studies, glossaries, longevity calculators, fund updates, online fund manager reports, risk profiler, pension video tutorials and member seminars.