The recently released Productivity Commission review of the Australian superannuation industry was written to address political issues with a total disregard for the best interest of members in superannuation funds.
I have worked in the superannuation and investment industry for over 40 years and its ‘Common Sense 101’ not to engage in picking winners.
Picking fund performance winners has so many different variables. Investment funds have different investment styles, asset allocations, benchmarks, research, trading methodology, currency policy, ethical policies, governance policies and access to listed and unlisted investment assets.
Comparing the returns of one balanced fund to another is like comparing apples with oranges.
What about the superannuation investors life time horizon?
A 21-year old should be put in an asset allocation that reflects their time until retirement and their individual risk profile which will be very different to a retired 70-year-old investor.
This issue of underperforming superfunds needs to be addressed and these funds need to be made accountable to their members. The industry associations, regulators and government need to apply pressure and incentives for the non-performing funds to merge.
Trustees are legally obliged to act in the best interests of their members but why isn’t this being enforced?
The other major issue highlighted by the Report is the number of investors with multiple accounts.
This issue should be addressed by educating Australians about the superannuation system and empowering fund members to take ownership in managing this matter. The ATO could be proactive in monitoring multiple accounts.
Financial literacy as a basic life study course should be in all school curriculums and given the highest priority. The FPA, AFA and other associations should be leaders in this important undertaking along with the government.
What about self-employed Australia?
The majority of the jobs in the future will be self-employed, but both sides of the superannuation politics (industry funds and retail funds) don’t like self-managed superfunds because they lose control of the superannuation assets.
Everyone forgets that self-employed people are not covered by the compulsory 9.5% superannuation scheme and it is imperative that this sector is aware and educated about the importance of superannuation.
The Australian superannuation system is recognised worldwide as a very progressive initiative but now we get a report based on selecting winners for political reasons. This is simply bad public policy!
At a time when financial advice has never been more important to Australians, the number of consumers that can afford / access advice is in decline due to mounting costs, regulation and client affordability.
Simultaneously, the need to access advice, particularly in the area of retirement and debt management continues to increase dramatically and will escalate even further in coming years.
Hence the need for Australians to be financially literate as knowledge will assist them to take responsibility for their own superannuation assets.
Unfortunately, self interest groups with loud voices continue to dominate the debate and influence policymakers at the expense of the long-term sustainability of the financial services sector – and in turn the well-being of Australians and the economy.
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25 February, 2020
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