Each month we provide a wrap of the biggest issues in personal finance.
August saw the royal commission turn its attention on the superannuation industry. Westpac became the first major bank to hike its home loan rates this year. Australia’s financial literacy was put to the test and the results are less than spectacular and an interesting report was released on the impact of fees in retirement.
Royal Commission Turns Spotlight on Super
Round 5 of the royal commission concluded in August with superannuation being put through the wringer. There were multiple objectives with witnesses from NAB/MLC, AustralianSuper, IOOF, Hostplus, Colonial First State, ANZ and APRA all giving evidence.
Some of the more shocking findings were of NAB/MLC charging dead customers (perhaps more shocking was that this was the second major bank caught doing this). Elsewhere, IOOF and CFS were shown to be taking action that wasn’t in the best interest of their members.
There was also a report released last month showing that members paid a total of $32 billion in super fees in the 12 months to 30 June 2018, rising 10% on the prior corresponding period (this excluded insurance premiums and additional advice fees).
It can be hard to know if you are in a competitive fund – Plenty can help you analyse your current super – get started now.
Westpac Hike Rates – Others to Follow?
Westpac became the first major bank this year to hike their home loan rates blaming an increase in its wholesale funding costs. The variable rates will increase by 14 basis points, effective from September 19. The move follows interest rate hikes by more than a dozen smaller lenders in recent times. The big question is whether the other 3 majors will follow – history suggests yes and it will be interesting to see the impact on an already cooling property market.
With so much movement it’s important to stay on top of your interest rates – Plenty’s free roadmap will you do just that – get started now.
How is Your Financial Literacy?
A high number of Australians couldn’t answer a simple set of five questions laid out by researchers as part of the latest Household, Income and Labour Dynamics in Australia (HILDA). The questions tested knowledge around interest, inflation, returns and risk with less than 50% of participants getting all 5 answers correct. These are very important topics that can have a very real impact on your future.
Want to see how you go – check out the quiz at the bottom of this article.
Report on Fees
A report released by Vanguard highlights the substantial impact investment costs can have on retirement income. According to the report, investors require an extra 10 per cent more in assets to live a comfortable retirement where they pay an extra 50 basis points in fees. Given that the average fees paid by Australians in super is around 1.1% vs. lower cost funds at 0.5-0.7% this should be a wake-up call to anyone in a high cost fund.