There is an awkward secret at the centre of Australia's superannuation system: the socialists are winning.

Looked at another way, the failure of Australia's banks and private master trusts to beat the union-linked industry funds on investment performance is close to being a national scandal. Those people being herded into retail funds by their employers are losing a fortune because their trustees are not making the decisions that count.

Amazingly, in both the year and the five years to June 30 the top 10 performing super funds in Australia were all industry funds; according to Super Ratings the average industry fund performance was 5.5 per cent a year compared with 3 per cent for retail funds and master trusts; in the past 12 months the difference was plus 1.5 per cent, on average, against minus 1.8 per cent.

That five-year performance difference represents $15,000 on a $100,000 balance, or nearly $100 billion if taken across the entire Australian super pool. And for the privilege of earning 2.5 per cent a year less, retail fund custom-ers apply around 1 per cent more in fees.

Think about this: virtually every industry fund has performed better than every retail fund since 1998—but at the same time every industry fund costs about half every retain fund because there's no need for a profit and those managing them earn smaller salaries.