Toni Thompson felt sick when she looked at her superannuation account.

The young mother, 26, had been reading horror stories about the banking royal commission and had become curious. She didn’t know how many super accounts she had.

After hearing how the major banks had charged customers hundreds of millions of dollars in fees for services they never provided, she wanted to know what her own situation was.

“I started work when I was 15 in hospitality and bounced around different hospitality jobs, didn’t really understand what super was, didn’t really care,” she said. “So I looked into it, because I had accounts everywhere. And I ended up looking into one of my accounts and saw the fees that were coming out and I just felt sick.”

She says the account only had $1,000 in it, and she was losing $25 a month in fees, maybe more. Within a year it would have lost $300 and in three years it would be gone.

Fees eating away savings

As of June 2017, more than 14.8 million Australians held a superannuation account and roughly 40% of them held more than one.

More than 5.9 million people are paying multiple sets of investment fees and administration fees (and potentially insurance premiums), and those fees are eroding their savings significantly.

The Productivity Commission estimates one third of the accounts in existence (about 10m) are unintended multiple accounts, eroding members’ balances by $2.6bn a year.

Experts constantly warn that one of the worst things you can do for your retirement savings is to have multiple super accounts, and that by consolidating your super into one account the typical worker will add $51,000 to their retirement balance by the end of their working life.

But Australians are notoriously disengaged from their superannuation, and don’t heed that advice.

The percentage of workers with just one account has barely increased since 2013, rising from 55% to just 60% in 2017.

And the major banks are exploiting this disengagement.

They also exploit the fact that nearly 60% of super members, according to the Productivity Commission, don’t understand their super fees and charges, too often because the fees lack transparency.

Toni says she’s finally woken up. The royal commission “put a bomb” under her.

She recently became a single mother, and had to stop working as a personal trainer so she could take care of her two-year-old son full-time. For the moment, she’s living on the single parenting payment that covers the bare minimum but is “not enough to save”.

It means her super savings are the only savings she has, and they’re tiny.

“It’s caused me a great deal of stress,” she said.

She’s trying to collect some old super still owed to her by a previous employer and has started consolidating her super accounts into a single fund.

She has chosen a not-for-profit industry super fund, because after reading stories from the royal commission, she doesn’t want her super managed by one of the profit-driven funds, called retail funds, which are owned by the major banks.

Toni Thompson, with her son Walter, says her super has caused ‘a great deal of stress’. Photograph: Alana Holmberg/The Guardian

Gary Vincett, 62, has done something similar.

The former operations manager at a Queensland printing company, Vincett had been with a retail fund since the early 2000s and had been happy with the fund before the global financial crisis, making annual returns between 14% and 19%.

He lost a lot of money during the crisis, but stuck with the fund for years, saying it was partly his fault because he should have been smarter.

But he eventually got annoyed. He says advisers kept shifting his money around, supposedly to get the best returns, collecting commissions every time. When his savings were invested in cash, the fees outweighed the returns.

He says it was hard to understand the admin fees and other indirect fees, which seemed very high.

“Super’s very grey,” he said. “Not a lot of people know much about it. It’s not necessarily the consumer’s fault, I think they make it nice and grey [deliberately].”

The final straw came when his savings were reinvested without his authority. It took him months to recoup the fees so he could leave the fund. He has recently joined an industry super fund.

Multiple scandals

Since the royal commission began in March, Australians have shifted billions out of retail funds into not-for-profit industry funds.

The royal commission shamed the big banks and financial institutions – including NAB, Commonwealth Bank, Westpac, ANZ, and AMP – for taking advantage of the opacity of Australia’s super system to charge excessive fees and trail commissions, and for charging customers for services that were never provided. It exposed how retail funds were involved in multiple scandals involving billions of dollars while industry funds were not.

In August, in its wrap-up of its superannuation hearings, the commission made a scathing assessment of some retail funds.

It also drew attention to recent work by the Productivity Commission which found the best-performing super funds in Australia were more likely to be industry-run.

It leaves the question – if industry funds are behaving more responsibly with members’ money, and if they are likelier to generate better returns for their members, why would anyone choose a retail fund?

It’s a question thousands of Australians have been asking themselves.

‘Non-conflicted financial advice’

AustralianSuper, the nation’s largest superannuation fund, has been a major beneficiary of the royal commission.

In the past six months, the industry fund has received $6.8bn from new customers, compared with $4.6bn over the same period in 2017.

Hostplus, another industry fund, has also seen large inflows of members and funds under management from the big four banks, AMP and IOOF.

Between March and August, it registered an extra 20,000 members and $640m directly from retail funds, when compared with the same six-month period last year.

“While it is difficult for us to determine the exact reasoning for this positive switch, we are confident our industry-leading investment returns, low administration fees, not-for-profit status and non-conflicted financial advice have all played a key role,” the Hostplus chief executive, David Elia, told Guardian Australia.

Hostplus has also seen a $2.5bn shift to the fund in the past two years after fans of the popular book The Barefoot Investor took author Scott Pape’s advice and invested in the Hostplus indexed balanced fund. It shows there is demand from the public for low-fee, simple to understand, no-frills super accounts.

Bernie Dean, the chief executive of Industry Super Australia, says the flow of extra funds this year has been consumer-led.

“Consumers are way out ahead of policymakers and law makers on this issue,” he said.

The increased flow of money to industry funds has coincided with another significant event.

In the June quarter, the asset holdings of industry funds exceeded the asset holdings of retail funds for the first time in history – $632bn to $622bn. The shift is largely the result of better investment returns by industry funds, but account switching has contributed.

When asked why customers are shifting billions of dollars out of retail funds, the retail super sector is reluctant to engage.

The Financial Services Council, which represents the retail super sector, says all superannuation funds – whether they’ve appeared before the royal commission or not – should be focusing on delivering the best possible retirement outcomes for their members.

It also warns, correctly, that not all industry funds are outstanding performers.

“Consumers should exercise caution in selecting a fund just because it is characterised as a retail fund or an industry fund,” Sally Loane, the FSC chief executive, told Guardian Australia.

“There are poor performers on all sides. Of 26 persistently underperforming MySuper funds identified by the Productivity Commission, 12 were retail, 10 were industry funds, three corporate and one public.”

Those figures are accurate, but the Productivity Commission report from which they come does emphasise that the top 10 performing funds are all not-for-profits.

Loane says Australia’s system of allocating new default super accounts to workers when they start new jobs needs an overhaul, because it doesn’t suit the best interests of all workers, and sees workers accumulating multiple accounts.

That is also true. The Productivity Commission will make recommendations on that topic in December.

Consumers ‘crossing the street’ to industry funds

Industry Super Australia – the representative body of industry funds – is keenly aware of the zeitgeist.

A private survey conducted for the group by UMR Research in September found one in three retail fund members (34%) have considered switching funds in the past six months, and nearly half of retail fund members (49%) believe industry super funds offer better returns than retail funds (only 7% disagreed).

Gavin White, an associate director of UMR Research, told Guardian Australia the results were striking.

“This is usually a pretty stable market, with limited engagement, so if one in three retail fund members are thinking about switching? That’s significant.”

What about legislative change?

The banking royal commission released its interim report last month. It damned Australia’s big banks and insurance companies, blasting them for putting greed and the pursuit of short-term profit ahead of honesty.

But it didn’t include superannuation, because it only covered the first four rounds of hearings. However, the condemnatory tone will likely carry through to the final report, due in February, which will cover super.

The superannuation round of hearings had some of the worst revelations of the royal commission.

Colonial First State, for one, admitted the entire reason some of its super funds generated inferior returns for members had to do with the high fees it charged. And AMP admitted 47,000 customers whose retirement savings were wholly invested in cash had ended up with three years of negative returns.

Gary Vincett says he believes in superannuation, but the whole system needs to change.

“It’s too complex, too hard, no control, all hidden agendas,” he said. “My feeling is, if you’re earning a reasonable return you expect to pay a fee. But if they’re not making any returns, why should they get a bonus, why should they get paid?”