23rd Sep 2017

Flawed new super rules a risk to consumers: Industry Super

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Calls to clean up super fee-asco
Ben Hocking

Industry Super Australia (ISA) claims new fee and cost disclosure rules set to take effect next week will provide misleading information to consumers trying to compare super funds.

Independent superannuation ratings agency SuperRatings has released a report suggesting the new rules will make it difficult to compare super funds and increase investor confusion.

In particular, the ratings agency highlights the different disclosure mechanisms for platforms and superannuation funds, which could mislead an investor into believing a platform investment is cheaper when, in fact, it may be more expensive.

Some superannuation funds offer platforms for you to choose your investments. These platforms may have lower fees and costs in their PDS because the figures there just cover the fees and costs of the platform. This investment is not necessarily cheaper when you take into account fees and costs that are being charged inside the investments on the platform's menu.



The report highlights how the primary product disclosure statement (PDS) of a conventional super fund could look four times as expensive as the costs disclosed in a platform's primary PDS, even when the total costs of investing in the same product via a platform might be more expensive. 

 

The report states that “members are to be provided with a secondary PDS and calculate the ETF costs themselves (for a platform product), which will cause confusion and introduce the risk of miscalculation”.

SuperRatings describes this “lack of simple comparability” as one of its biggest concerns, and goes on to state: “it is imperative that consumers can make fair and reasonable comparisons, which are not unduly complicated”.

The new disclosure rules mean that if a consumer invests through a super fund, all fees and costs are disclosed in one place, including indirect costs. If, however, a consumer invests through a super fund that uses a ‘platform’, he or she could need to scrutinise multiple PDSs to calculate fees and costs.

ISA Public Affairs Director, Matthew Linden said: “Over $500 billion is invested through platforms, which are typically owned by banks and wealth management groups and used by financial planners.

“The new super rules are more likely to mislead consumers than help them.

“It is time for the Government to step in. Otherwise super fund members across the country could be misled.”

 

Opinion: Government needs to defer confusing changes

Comparing superannuation funds is essential for workers seeking to achieve the best financial outcome in retirement.

If the Government is serious about lessening the reliance on the Age Pension in the coming years, it is critical that Australians are not hindered in making a decision that could significantly affect their retirement income.

This new legislation, which treats platforms and intermediary trusts investing in real property or infrastructure differently to regular super funds, is adding a level of complexity that has no reason to exist.

It isn’t surprising that any confusion is likely to benefit the bank-owned superannuation funds that generally do have higher fees when they are able to be compared accurately against Industry Super funds. It could be argued that every piece of proposed regulatory change in the superannuation space is targeting industry funds, rather than looking at delivering the best outcomes for workers.

This latest change comes on the back of attempts to change the make-up of superannuation fund boards to include one-third independent directors and an independent chair.

These changes come at a time when the poor governance, culture and conduct within banks and their wealth-management arms are at an all-time low.

The Australian Securities and Investments Commission (ASIC), which is introducing the new changes, has provided no explanation for the exemptions of certain funds from the disclosure requirements. Surely the changes should be deferred until a time when all funds are treated the same.

What do you think? Are you worried that comparing super funds could become even more confusing and threaten your ultimate retirement nest egg?

Related articles:
Government attacks industry super again
Industry super funds still the best
How many times is your super taxed?





COMMENTS

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MjP
27th Sep 2017
11:14am
A prime example of the rich making themselves richer at the expense of the less well off.
dreamer
27th Sep 2017
12:01pm
No torrie is good for the working man
floss
27th Sep 2017
11:25am
It is in the governments interest to encourage people to have as much super as possible to take the burden away from the public purse .All we have seen from this Liberal government is attack after attack on super funds especially the Industry funds.What is the hidden agenda.
Raphael
27th Sep 2017
11:35am
I don't see any attacks
Just making it better for super members
MjP
27th Sep 2017
11:59am
If the changes are making it better for members why aren't they being applied to all super funds and not just the Industry funds. The Industry funds consistently out-perform retail funds and without all the scandals.
Tom Tank
27th Sep 2017
12:00pm
There is none so blind as those who will not see. I suspect that you are letting your political bias cloud your assessment of issues such as this.
It certainly appears to be set up to favour certain sections and disadvantage the industry Funds.
Rae
28th Sep 2017
8:07am
That reason would seem logical floss but it is incorrect. The politician's aim is to get re-elected and gain as much as they can while in power. We no longer have win/win deals but only win/lose deals planned to benefit those in power and those donating to them or offering personal encouragements.

Any change which is designed to confuse and hide the true costs is suspect. The banks will go down. It is only a matter of time really. They have lent too much into a stagnant economy where wage earners are being ripped off right and centre.

The Australian Share market has tracked nowhere for a decade now and with the high electricity and coming fuel price rises I can't see any money being made. Dividends are falling, wages are falling, rents are falling and fixed costs rising.There's $2 trillion private debt and no income increases to cover it.

There is no burden to the public purse from payment made in Australian dollars to Australians to be spent at home. The only loss is to the current account balance because we no longer provide our own goods or services in many cases.

It's a dog's breakfast and the mess will have to be cleaned up after this right wing nutty ideology has wrecked the economy sufficiently.

The constant attacks on worker's by rent seekers always ends badly and this time will not be different.
Ahjay
27th Sep 2017
11:47am
There appears to be a phobia in the NLP about separating the general public from their money in favour of the1% . The law changes have nothing to do with improving the retirement outcomes for superannuants.
The only way we will ever see equity in the system will be when politicians and public servants are one the same system as the rest of us. That's not likely to happen.

The Law Makers will look after themselves and their rich mates.
KSS
27th Sep 2017
12:42pm
I'm all for transparency in fees and charges. Perhaps it would be better to have something like the mortgage rates where you not only advertise the actual mortgage rate but ALSO the comparison rate AFTER all fees and charges are added to the interest rate to get the final figure.
Tom Tank
27th Sep 2017
4:37pm
The advice I have received from a Superannuation specialist is that the Super Fund cannot advertise what the costs would be for one of these "platforms" as they don't know what the costs would be until a member actually invests their funds in it. They know their own charge but only find out what the "outside" investment will charge once the super fund member specifies what that investment actually is.
This whole business will make investment decisions more complicated and one does suspect the government's motives are in going down this path.
Raphael
27th Sep 2017
7:25pm
The super funds know very well what the all the fund managers chargers are
Your super find contact is telling fibs
All the more reason for this government to pass this legislation
Well done MT and the le real party
Crimmo
27th Sep 2017
5:46pm
This is ideological back scratching. Nothing to do with looking after the people/members.
Raphael
27th Sep 2017
7:26pm
Wrong - see my post above
MjP
27th Sep 2017
7:59pm
You are the one who is wrong Raphael, this legislation is about making Industry Funds unviable thus making the retail funds run by their mates more money.
ex PS
28th Sep 2017
8:45am
If the government was serious about fee charges they would link charges to annual profits and make them a set percentage for anyone who wants to manage Super funds. No what fund you were in you would pay the set 1% or whatever the fee is worked out at. No profit, no fee.
If a Super Fund wants to earn more profit, it has to work smarter and harder for the Super member, not the companies who's products they are selling.


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