Public sector super scheme

Public sector employees (of which I am one) now have an opportunity to buy into a contributary super scheme, with the employer contributing dollar for dollar up to a ceiling of 3pct of salary.

Effectively this is a 3pct pay rise (muffled cheer), or a 100 percent return on contributions to the fund.

Downside of this is you have to give the money to either ASB, AXA or AMP fund managers. Now, I have voiced my opinion on the fund management industry in the past, and I am resisting (and feeling somewhat conflicted) at the thought of lining the pockets of these characters with my hard-earned cash. On the other hand, I'd be turning down effectively a 100pct return on contribution, before any returns paid by the fund itself (no doubt modest).

Part of me says take the 3pct and buy your own, but where can I find an investment with a 100pct return?

What should I do?

PLACEBO, Dollar for dollar go for it. Fund managers can hardly in all their incompenance do to much damage from a start like that.
macdunk

Sorry this is not very clear but it might help.
You can knock up a crude spreadsheet to do this sort of calculation quickly

,1000.00,0.20,,2000.00,0.10

1,1000.00,200.00,,2000.00,200.00
2,2200.00,440.00,,4200.00,420.00
3,3640.00,728.00,,6620.00,662.00
4,5368.00,1073.60,,9282.00,928.20
5,7441.60,1488.32,,12210.20,1221.02
6,9929.92,1985.98,,15431.22,1543.12
7,12915.90,2583.18,,18974.34,1897.43
8,16499.08,3299.82,,22871.78,2287.18
9,20798.90,4159.78,,27158.95,2715.90
10,25958.68,5191.74,,31874.85,3187.48
11,32150.42,6430.08,,37062.33,3706.23
12,39580.50,7916.10,,42768.57,4276.86
13,48496.60,9699.32,,49045.42,4904.54
14,59195.92,11839.18,,55949.97,5595.00
15,72035.11,14407.02,,63544.96,6354.50
16,87442.13,17488.43,,71899.46,7189.95
17,105930.56,21186.11,,81089.41,8108.94
18,128116.67,25623.33,,91198.35,9119.83
19,154740.00,30948.00,,102318.18,10231.82
20,186688.00,37337.60,,114550.00,11455.00

Columns are:
year,
Cumulative total of $1000 per year plus returns plus 20% return,
20% return for year,
,
Cumulative total of $2000 per year plus returns plus 10% return,
10% return for year,

The end of year 14 sees the lower input amount at the high return exceed the larger input amount at the lessor return in total value.

So how good are you, how good are the funds, what is the time frame?

regards

Paper Tiger

Hi PT, I appreciate the positive input.

ASB provide a handy set of charts in their bumph, returns obviously vary according to the fund (interest pa):
Cash only: High 4.5; Low 2.1; Avg 3.3.
Conservative: High 14.2; Low -4.2; Avg 5.0
Balanced: High 18.6; Low -7.6; Avg 5.5.
Growth: High 23.3; low -11.2; Avg 6.1.

My own personal portfolio is showing average returns of 34 percent PA over 2 years. I can't assume this into the future, but it's doing a damn sight better than any of the average returns published by ASB.

Placebo

I tried a few different rates of return in that spreadsheet and discovered the following interesting fact.
If your rate of return is 10% above the funds rate of return it takes 14 years to overtake the fund as in:
You Fund Years
10% 0% 14
15% 5% 14
20% 10% 14
etc

If that difference is 15% then it takes 10 years
If that difference is 20% then it takes 7 years

Thanks PT. Sounds like with dollar for dollar business, I can't lose in the medium term (at least).

Placebo: Key point: Can you access your money and/or employer contributions should you want to ??

If so: Great
If not: be very very cautious

At work we have a reasonable super scheme but its "locked in"so Im a non starter. Re my contributions - its my hard earned money if I need access then I need access.

Thats the key point for me (and to others feel free to disagree but im not changing my mind:D)

The beauty of a scheme where your money is locked in is just that.It is locked in. You won't appreciate that until you get to age 65 or retiring age. That assumes you are with a half decent company which is still going to be around and will pay out. The civil service or the major banks will still be here in one form or another.
I was in a dollar for dollar scheme and and the money came out of my salary every week, and the same amount out of my employer's pocket.
As you never handle the money you don't miss it from your pay. I read once that the long term average for super schemes is about 8%-9%
It is not spectacular, but it is set-and-forget and if you get really grumpy with the fund managers,you can try and get elected as trustee and you may have some influence on the length of their contract if they are not perfofming.
I agree with Macdunk even the fund managers can't completely destroy your other advantages.

My girlfriend is in something like this. She is more of a spender than a saver so I made her up her contributions to the max 3% that the employer contributes. ( She is a teacher....I think they have a different scheme). For someone like her it is perfect. Can even keep contributing when she leaves to have kids, money can be accessed for financial hardship etc etc.

She has got 50% in the balanced and 50% in the growth. The returns after taxes and fees last year were 7.99% and 10.92% respectively. This is OK but when you consider the employer has invested as much as her then I think its great. Otherwise she would have had savings in a bank term deposit. The other thing is I won't let her retire for at least another 30 years!!!!...hahaha

Personally I think they are a good set and forget scheme.