4th Dec 2018
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Superannuation reforms continue to hurt retirees: Report
Author: Ben Hocking
Super changes hurting members

A new research report released by the Australian Institute of Superannuation Trustees (AIST) has found that fund members are the losers of policies providing concessions to the for-profit sector.

Successive governments have provided dozens of regulatory carve-outs and concessions to products, benefitting banks and other retail super providers for more than a decade.

The report – based on AIST research and authored by corporate governance expert, Professor Thomas Clarke – shows how regulatory carve-outs given to the for-profit super sector have resulted in serious omissions and exemptions in superannuation reforms, and which have impacted badly on the interests of super fund members.

AIST Chief Executive Eva Scheerlinck said regulatory carve-outs or concessions provided to the for-profit super sector had watered down many vitally important consumer reforms in superannuation.

This included government decisions not to improve disclosure and transparency in non-MySuper funds, which manage more than $1 trillion of super across eight million member accounts. As just one example, a government decision was made not to extend best practice disclosure requirements for MySuper funds to other super products.

According to SuperRatings, in the non-MySuper ‘choice’ sector, bank and retail-owned funds charge between 117–182 per cent more than profit-to-member funds and generally underperform over both the short and long term.

“Constant erosions to the legislation and for-profit super providers being let off the hook has been at an enormous cost to consumers who are effectively left to fend for themselves,” Ms Scheerlinck said.

“We have a mandated super system but providers managing more than $1 trillion of super savings are not held to account.”

The report also notes the legislative gaps in super reforms have led to a systemic lack of comparability of data in the super system.

The Australian Prudential Regulation Authority (APRA) collects and publishes data on the performance, fees and costs of MySuper products, but does not collect or publish equivalent data on ‘choice’ products or investment options.

In compiling the report, Prof Clarke said he had been “astonished” by the sheer number of regulatory carve-outs afforded to the banks and other for-profit super providers.

“The research points to an army of lobbyists – and the financial institutions that employ them – having been very successful in persuading governments to go light on regulation,” Prof Clarke said.

“This panoply of self-interested exemption has arisen over time, incrementally and without any ostensible rationale other than to benefit providers. The exemptions are systemic, on a vast scale, and have been occurring for decades.”

Ms Scheerlinck said uniform disclosure requirements across the super system were needed as the first step towards improving regulation in superannuation. This would require extending current “product dashboard” requirements for MySuper products to ‘choice’ products.

AIST has also called on APRA to publish comparative data to help consumers more easily compare and choose super funds, and to help regulators and other stakeholders have a better understanding of the efficiency of the super system as a whole.

“All sorts of arguments have been put up by the retail super sector as to why these things shouldn’t happen when what they really fear is losing the easy profits to be made from consumers being in high fee, opaque products,” Ms Scheerlinck said.

“Due to the complex nature of super, a carve-out can sometimes seem like a minor amendment when in fact it can be worth billions of dollars in profit to a bank.”

Ms Scheerlinck said the report showed that the practice of providing carve-outs on super legislation was entrenched.

“Simply because some practices are deeply embedded and conducted on a mass scale, doesn’t make them permissible” she said.

Read the full report here.

What do you think? Has the for-profit super sector had it too good for too long? Is it time Government legislated to increase the transparency of super fund performance?

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    COMMENTS

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    TREBOR
    5th Dec 2018
    10:27am
    Superannuation should never have been a business venture... too much scope and too many avenues for gouging. The Keating model was flawed and successive governments have made it worse.

    Trebor Scheme.... we need someone with vision and forward thinking to take over the reins of this government and install a provisional government until the people wake up fully.

    No megalomaniacs or self-interested twerps need apply.
    Paddington
    5th Dec 2018
    10:57am
    I think the present government is cooked lol! Victorian election just proved that. They might as well go to the polls now as time will not help them. Avoiding Canberra is just buying them more time out of opposition.
    Rosret
    5th Dec 2018
    11:24am
    Agreed Trebor. So much of the Australian dollar has left our shores because of this venture.
    It is easy to see with hindsight but what a huge mess it has turned out to be. So schemes that would look after employees for life were replaced by schemes that will for the majority of retirees require them to have a supplement from the government purse.

    You can't blame this government for the private super fund demise. This started in the 1990s and its problems are just coming to fruition now the Baby Boomers are retiring.
    Adrianus
    6th Dec 2018
    10:28am
    TREBOR, you must have arrived in Australia in the 80's.
    The Superannuation system was vastly improved by the actions of Keating and Hawke and the LNP governments.
    You need to look at the changes in context and without the benefit of hindsight, while considering today's values.
    Prior to the 80's it was a self regulatory free for all, with the big mutuals taking the lion's share and the members being used and abused. Don't forget the mutuals were answerable to nobody, not even the ATO. Their stutory funds were never audited.
    Keating had vision. Perhaps not the vision you would want though. The Unions have taken over the roll from the big mutuals. You were happy for a little while because it seemed like a good deal. But it didn't take long before the implementation of new taxes replaced the high cost of distribution and profit sharing, attributed to the big mutuals, for you to become disillusioned.

    You're right, there is a much better solution. I'm afraid it is now too late. Your Union mates and the banks will not loosen their grip now. We can only hope that the number of SMSFs becomes that great that it delivers a resounding message that reform is needed. So far 96% of all super funds are SMSFs but this is not enough.
    Old Man
    5th Dec 2018
    12:09pm
    In the initial stages of compulsory super, it would have been logical for those parties well versed in finance to become a big part of the management of the super funds. Now, some 26 years later, there has been a huge change in the management of compulsory super with non-financial parties joining in and in doing so, the financial aspect has been changed forever. The regulations around super may still be based around the original model and it's about time that those entities outside the finance industry are recognised.

    There seems to be a mish-mash of rules that need clarification and this should be a priority for the current and incoming governments. I think that superannuation in Australia has reached a stage where politics should be set aside and legislation should be formulated that will cover all super funds to give uniformity and transparency. I believe that we still need a variety of funds, that we don't need one fund to cover all and members should be allowed to decide which fund suits their purposes.
    MICK
    6th Dec 2018
    9:29am
    Your normal dismissal of the facts OM as you seek to muddy the water.
    The article alleges that Retail Funds have had many sweeteners fed to them. This is consistent with the current rich man's government looking after their rich mates.

    Even with handouts to management Retail Funds still cannot cut it and continue to make poor returns for members. Maybe the government needs to legislate and ban Industry Funds in future.........oh yes they've already tried that one on.
    1984
    5th Dec 2018
    1:20pm
    Maybe it's time for the government to take over all the super funds and bring it under their control so no more top end of town excessively greedy little piggy snouts in the trough. Make transparency a priority, employ professionals that will have to adhere to strict guidelines for the benefit of the people. That way no multimillion $ salaries or ridiculously obscene bonuses.
    Do away with all SMSF. They can cash in all there wealth & put into the government controlled national super fund. If SMSF retirees want to keep control over their investment, fine but they will be treated by the ATO as having an income like any working Australian & pay the same appropriate tax irrespective of age.
    & introduce a universal pension with no deemed or asset testing. This can be paid for by the savings on simplifying the OAP.
    The current system is RS & gets worse every budget as the greedy LNP & ALP gouge more money from retirees.
    1984
    5th Dec 2018
    1:27pm
    Money can also be generated by the government to pay for a universal pension by taxing the interest earned on ones super irrespective of age. no tax concessions because you're 60 or over. If you earn you pay tax.
    Lothario
    5th Dec 2018
    2:04pm
    What is your problem with smsf’s
    Oh wait I know - you’re one of those greedy lefties who want our money
    Knows-a-lot
    5th Dec 2018
    5:17pm
    @Lothario. Greedy Rightards you mean.
    Not a Bludger
    5th Dec 2018
    1:39pm
    Once again, a rentseeking leftie outfit (AIST) plus a leftie uni lecturer produce a report that is both biased and incorrect.

    In particular, there are a wealth of analyses of performance of all manner of super funds, as has been reported in this column.

    Fundamentally, this report is just another part of the ongoing push by industry funds to protect the involvement of thug unions in their management, funds under management and profits.
    Lothario
    5th Dec 2018
    2:02pm
    Agree 100%
    Knows-a-lot
    5th Dec 2018
    5:18pm
    The paid Lieberal shills are out in force today I see.
    1984
    5th Dec 2018
    6:40pm
    They have to have something to gripe & whinge about. The way their LNP mates are getting hammered at the polling booths doesn't give them something to look forward to.
    It's all downhill from here for the lot of them.
    Captain
    7th Dec 2018
    8:09am
    The Wit brothers are back.
    Old Geezer
    5th Dec 2018
    2:23pm
    There is no way I would have super if I didn't control my own SMSF. Unfortunately I have seen what happens with all types of managed funds super or other investments and I don't like what I see at all. There is nothing worse than being told your investment has lost 50% but you are not told where the losses occurred. There are the fees you pay but with the structure are all sorts of hidden fees as people have to be paid all along the food chain of a managed fund.

    I recently got some quotes to manage my super in industry funds and the cheapest one wanted to charge me $20,000 a year which is more than 10 times what it cost to run my SMSF. That's only the fees I can see as I know their are also lots of hidden fees.
    Rae
    6th Dec 2018
    8:38am
    Yes I agree. I'm happy to hold investments outside of super and pay any taxes over the $33000 I can earn tax-free. Investment taxes are very generous anyway.

    If 8 million people hold these accounts and are either happy or too lazy to fill out a transfer form then so be it.

    We know regulatory capture is endemic these days so there is no excuse to not finding out the rules and acting accordingly.

    I didn't want a SMSF as I could see the sovereign risk and fees and charges ballooning.

    They'll legislate for annuities or some such next. It was easy to see the rot start when powerful banks started funding their representatives into positions of leadership within government.

    The big mistake is trusting where trust is not due.
    floss
    5th Dec 2018
    3:41pm
    I have a large amount with a Industry fund O.G and it cost me very little your figure is just another of your lies that come easy to you.
    Old Geezer
    5th Dec 2018
    5:14pm
    I wish it was a lie as I can't believe it costs so much in fees. I got 10 quotes and that was the cheapest one.
    Knows-a-lot
    5th Dec 2018
    5:16pm
    "For profit" is about maximally gouging the public - capitalism gone mad!
    Travellersjoy
    5th Dec 2018
    5:27pm
    Why am I not surprised?

    The devil looks after his own, and the L/NP and IPA, the rest of the cheats and thieves.
    On the Ball
    5th Dec 2018
    10:02pm
    My Super was doing fine until Trump And the LNP decided to f$%k with our economy and send the stock market into jitters.
    Adrianus
    6th Dec 2018
    10:02am
    I suppose you think that Bill Shorten's Franking Credit policy is a calming influence on financial markets? An election looming in the next 6 months with Labor in front on polls, makes people pay attention to Bill Shorten just as much as our PM.


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