Account based pensions can be a popular option for people who are transitioning into retirement and are seeking a comfortable retirement with a steady income.
Many superannuation funds provide account based pensions that allow you to draw a regular payment from your superannuation savings, whether it be monthly, quarterly, half-yearly or yearly.
The money in your account based pension account continues to be invested and, according to ASIC, any investment earnings are generally tax-free.
Canstar Research has analysed the fees, returns and features of a total of 278 investment options across 65 account based pension products that have been in the market for at least three years.
Out of the 55 providers assessed, six were found to have provided Outstanding Value and were awarded an overall 5-Star Rating.
Outstanding Value account based pensions: How do they stack up to the market average?
AustralianSuper, Cbus, HESTA, Hostplus, Prime Super and Sunsuper have each been awarded a 5-Star Rating in Canstar’s 2019 Outstanding Value Account Based Pension Star Ratings.
Canstar Research weighed up each product’s offering when it came to financial advice, investment options, member access (such as online and phone access), beneficiary options, insurance, income payment options and a range of fees considered in its methodology when assessing this rating.
The Research team deducted administration fees, investment management fees, performance fees and other costs from annual investment returns in order to work out the net benefit offered by each account based pension.
The products were assessed across four profiles based on their percentage of “growth assets” – which are higher-risk but potentially higher-return assets such as shares and property – within their investment allocation:
- Cash (0% growth assets)
- Moderate (20%-59.99% growth assets)
- Balanced (60% – 79.99% growth assets)
- Growth (80%+ growth assets)
The 5-Star Rating recipients tended to have a combination of stronger net annual returns and lower fees than the market average across all four profiles.
Canstar Research said the market average net annual return on account based pensions in our database has decreased, down from 7.05% in 2018 to 6.02% in 2019, and is below the 2014-2019 market average of 7.04%. The Research team said this could be due to several factors, from an overall downturn in global returns due to economic uncertainty, to a shift away from aggressive asset allocation in the last 12 months.
The table below shows that over the past five years, the average net annual return (which deducts fees from gross returns) for the wider market ranged from 1.85% for cash to 9.41% for growth, while the 5-Star average ranged from 2.40% for cash and 11.01% for growth.
|Average Annual Investment Earnings and Fees – Five Years to 2019|
|Market Average||5-Star Average||Difference|
|Net Annual Return||1.85%||2.40%||0.54%|
|Fees (as percentage of balance)||0.22%||0.18%||-0.04%|
|Net Annual Return||8.23%||10.69%||2.46%|
|Fees (as percentage of balance)||0.23%||0.16%||-0.07%|
|Net Annual Return||6.16%||8.33%||2.17%|
|Fees (as percentage of balance)||0.22%||0.18%||-0.04%|
|Net Annual Return||9.41%||11.01%||1.60%|
|Fees (as percentage of balance)||0.24%||0.15%||-0.09%|
|Source: Canstar Account Based Pensions Star Ratings 2019. Figures show the average net annual returns and fees for products on Canstar’s database over the last five financial years, 2014-2015 to 2018-2019. Net annual return figures are net of total annual costs. Fees are 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.|
The 2019 5-Star Rated account based pensions are listed below in alphabetical order.
For the second year in a row, AustralianSuper received a 5-Star Rating for providing Outstanding Value.
Canstar Research found AustralianSuper provided good services for members, including an extensive advice offering that allowed for both comprehensive and scaled financial advice. It also provided retirement calculators, tutorial videos and investment fund reports to members.
AustralianSuper received above-market net annual returns across all profiles and products considered in this star rating, with the major standout being the balanced investment option, which had a net return of 9.33% in 2019, compared to the profile market average of 7.68%.
Cbus has been recognised for providing Outstanding Value to customers in 2019, and received an overall 5-Star Rating.
Canstar Research noted Cbus had improved in its moderate profile compared to last year, largely due to a strong year of returns in 2019 by its Conservative Growth account based pension product, which achieved a net return of 7.98%. The team was also impressed by Cbus launching a new mobile app which allows members to access and monitor their account via their phone.
HESTA was also found to have provided Outstanding Value for account based pensions in 2019.
The Research team found HESTA had improved its performance in all four underlying profiles, particularly in the balanced profile HESTA Eco account based pension, that was rated for the first time this year and performed very strongly. HESTA Eco returned 11.93% in 2019 compared to the profile average of 8.23%.
HESTA had a strong 2019 in terms of overall returns, with all its account based pension products beating their respective profile averages.
Hostplus retained its overall 5-Star Rating, providing Outstanding Value to members in account based pensions for the second year running.
Canstar Research was impressed by Hostplus’ efforts to enable its members to make more informed decisions by providing well-rounded advice and education resources. The team said Hostplus offered comprehensive and scaled advice, as well as online resources such as retirement calculators, tutorial videos and investment fund reports.
Hostplus Pension cash performed particularly well in 2019 with a return of 2.1%, compared to the profile market average of 1.64%.
Prime Super received its second consecutive 5-Star Rating for providing Outstanding Value for account based pensions.
Canstar Research found all of Prime Super’s investment options that it evaluated had performed above the profile average of account based pensions considered in these Ratings. A standout was its Managed Growth product, which had an average net annual return of 11.75% over the five years considered, compared to the market average of 8.23% for the Balance profile.
For an impressive fourth year running, Sunsuper also received a 5-Star Rating for providing Outstanding Value.
The Research team found Sunsuper offered a number of avenues for members to become better-informed about their financial decisions, including through access to comprehensive or scaled advice, retirement calculators, investment reports and online risk calculator.
The research showed that in 2019 Sunsuper excelled in the growth profile, where its growth investment option returned 9.82%, above both the market average of 7.99% and the 5-Star average of 8.75%.
For more information about the 2019 Account Based Pension Star Ratings and how they were calculated, please view the ratings methodology.
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