Super funds are ‘exploiting’ members: ASIC chairman

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Superannuation funds are exploiting members and have forgotten that they are built on other people’s money, according to Australian Securities and Investments Commission (ASIC) chairman James Shipton.

Meanwhile, ASIC is under pressure to make super costs more transparent after a review found disclosure fees were too difficult for the average consumer to understand.

Speaking at the Financial Services Council (FSC) annual summit in Melbourne on Thursday, Mr Shipton warned that the $2.6 trillion industry had a “trust deficit”. He said that issue would be magnified when the banking royal commission resumed on 6 August and focussed on superannuation.

“To be blunt, there has been too much focus in many parts of the superannuation sector on exploiting opportunities to make money from Australians instead of focussing on the responsibilities that come from being the custodians of other people’s money,” he said.

“This must change.”

He said some of the blame for super funds “exploiting” members was due to public apathy when dealing with the sector.

The ASIC chairman was also critical of the delayed reporting of breaches by financial services companies to the regulator, with four years being the average time between a company identifying a breach and ASIC being notified.

He said that there had been a 30 per cent increase in breach reporting by financial services groups in the past year, stressing that there was an urgent need for investment in systems, procedures and policies that more quickly identified problems.

“This is behaviour that leads to unacceptably poor member outcomes in super, and it must stop if Australians are to have real trust in the superannuation system,” Mr Shipton said.

Financial Services and Revenue Minister Kelly O’Dwyer said via a pre-recorded video that it was time to “draw a line in the sand”.

“Use it (the banking inquiry) to separate the behaviours which should not have occurred in the first place, and a new post-Commission era where trust is regained and maintained,” she said.

The Australian reported on Wednesday that ASIC was under pressure to make costs more transparent after a review found consumers were being “dudded” by poor disclosure of fees.

Matt Linden, public affairs director at Industry Super Australia (ISA), said the review showed “fee disclosure was far too complicated for experts, let alone for consumers.”

The review “finds fee disclosure in the superannuation and managed­investment scheme industry has been haphazard, opaque and open to gaming by funds managers looking to minimise their published fees,” The Australian reported.

It also said that Westpac’s wholly owned wealth arm, BT Financial, “had sent shudders through the sector after it outlined plans this week to introduce a new cut-price 0.15 per cent asset administration fee for customers invested through the BT Panorama Investments and BT Panorama Super platforms, along with a flat account fee of $540 a year.”

On an average account, the move represented a fee cut of 40 per cent.

Are you looking forward to the banking royal commission moving onto the superannuation industry? Are you apathetic when it comes to your super? Do you know what fees you are paying and how they compare to other funds?

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Written by Janelle Ward

110 Comments

Total Comments: 110
  1. 0
    0

    I would like to see both fees and investment return calculations made more transparent

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      I’d like to see the what the remuneration of executive staff is and I’d like a comparison between Industry and Retail Funds. That is something unlikely to happen because the current government is a protector of crooks in suits at the top end of town.
      If there is nothing to hide then WHY NOT?????

    • 0
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      Superannuation is a business. All business is about making profits for itself. Superannuation funds should be run by the Government because it should be at its best interest to make sure all Australians will have enough money to keep themselves when they retire.

    • 0
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      Mick do you really think the current government protects union bosses better than a Labor government

    • 0
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      Mick your union bosses would never disclose their remuneration and kickbacks.

      Anyone receiving a pension from super especially industry funds is being short changed as they are not now getting the benefit of any franked credits on their investments. Those franked credits are being used to pay the tax of those in the accumulation phase resulting in a nice big bonus (kickback) for the union bosses running them.

    • 0
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      Originally I thought that was the idea, jackie – that people could save for retirement and thus the burden on pension funding would be less in the future… instead it’s been hijacked as just another nice little earner for those ‘on the inside’.

      It should always have been a government initiative – but not one controlled and accessible by politicians, who may, like everyone else, put to the Fund a business proposition to fund infrastructure etc, and repay at a specified rate of interest…. thus the assets/outgoing would be controlled – unlike the current wreckage of social security funding coming from ‘consolidated revenue’ (just another way of telling a lie) regardless of how much actually goes into that funding from contributors out here in Taxland.

      Like all the funding that goes into roads etc from petrol and rego etc – it all gets sidelined into pet projects and party ideological ’emergencies’, so the contributor is always left out in the cold and is then subjected to ‘private enterprise’ reaping the lion’s share of the cream off the top…. long before the contributor ever gets his/her hands on one cent.

      Trebor Scheme anyone?

    • 0
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      Nowhere ‘especially from industry funds’ OG – the proof is in the annual return to contributor.

      Get with the facts and people might begin to give your views some credibility instead of using them as a stand-up comedy routine.

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      Trebor explain to me then why someone getting a pension gets the same return of others in industry super funds no matter where their money is invested?

    • 0
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      Mick the executive remuneration is generally in the annual reports. Most people don’t bother to read them.

    • 0
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      Nice to see the government has given you a shift again Hasbeen/OG.

      You of course do not want to compare the remuneration of CEOs from Industry Funds against Retail Funds because that likely would tell a complete story of the top end of town in the feeding trough. WHY do you think Retail Funds perform so poorly against Industry Funds. Can’t have money going to those who contribute to the funds can we?

      You two have a track record of changing the subject to avoid confronting the truth but readers on this website have woken up to you. Wasting your time and the government may want to not employ you in future.

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      An odd way -of putting your question, OG – but I’ll try…

      Your basic contribution goes into the mega-super fund, and you are permitted to place extra in as super up to a specified limit. Whatever concessions are due to super contributions are still to be resolved rationally, but the outcome remains that those who are able to contibute more to their personal retirement fun – up to a specified limit – are NOT on the same wicket as those who are forced by whatever circumstances to get by in retirement on the basic Pension as derived from social security levies, the still persistent 7.5% of income tax, and the Future Fund as folded into the retirement scheme.

      NOBODY gets a free ride any more – but everyone can put away super to a limit and then invest elsewhere as they choose – but be faced with tax as required for a change.

    • 0
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      Trebor a brick wall has more idea of what I am talking about than you. You really have no idea about super at all.

    • 0
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      I see the LNP shills are out in force today.

    • 0
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      You don’t have super, OG – you have no right to comment. You claim to be a SMFR who turns $400k into an $80k profit annually, travels first class, has everything under the sun, knows everything about investment and has connections with politicians… but you don;t even vote according to your story.

      The super system is broke – nobody says you can’t have a SMF on the side – but you only get one bite at the cherry of any subsidies that come with super – since you will already, under the Trebor Scheme, be receiving a minimum etc as described.

      You may choose to opt out any time from the Trebor Scheme and go it alone – but you’ll need to negotiate for any concessions in super, and will still be bound by the maximum contribution rules…. beyond which it is savings pure and simple and you are liable for tax on the earnings, same as assets that produce income and such … your choice…

      The system for the majority needs to be fixed – nobody actually cares about your purported financial wisdom.

    • 0
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      Read the other day (ASIC I think it was) that 90% of self managed super funds fail.

    • 0
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      Well Noodles if my SMSF is failing then I am loving it.

  2. 0
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    Just like the banks Super Funds are only interested in how much THEY can charge and how much money THEY can make off the mug workers.

    • 0
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      Your comment refers to Retail Funds which bleed their members dry.
      The union representation on Industry Boards is why these funds are outperforming Retail Funds and that is why the current government has tried to remove union oversight….so that the top end of town can give themselves huge salaries…….money belonging to members.

  3. 0
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    We all need to complain loudly to the fund managers. I have been complaining to financial adviers about the fee system for years, got nowhere. After the first Royal Comission hearings I wrote to AMP direct about their fee structure. It has taken seven different people to handle the complaint and many phone calls but I am told I will be getting an answer next week. The more complaints the funds get the more likely they are to change the system.

  4. 0
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    Industry Super funds are apparently looking after their members- witness their suoerior performance

  5. 0
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    Who was the clown that said WE DO NOT NEED A ROYAL COMMISSION perhaps they knew it would embarrass their mates and it certainly did.

    • 0
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      I think it was Malcolm Turnbull. Funny that. Hiding his mates????

    • 0
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      All the Royal Commission will do is make more rules which will make it harder for people to get loans and other financial products. The increased costs will also give lower returns on investments. Sure a few who blame the banks for their own greed might get a bit back but that will be at the cost of the honest investor. Funny how things back fire so well on honest people who think they doing the bright thing.

  6. 0
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    So suddenly ASIC has woken from its slumber and making comments about how “bad” super funds have been treating their customers?
    As far as my suoer goes , yes I know what fees they charge as I get reports on that as I’m sure other funds send their customers, if they bother to read them.
    I see another witch hunt on super funds, mostly industry funds and the gov will try to find a way to “tap” into the all funds to see how much they can screw out of them.
    Took them long enough to set up this royal” commission into banks. How about a corruption commission into gov behaviour

    • 0
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      Just a few barks from the sleeping dog before he lapses into slumber again… once the next FedElect goes through, it will be All Quiet On The Investment Front again….. just the equivalent of a battalion a day going down the tubes… but TOI – they’re only investors….

      ASIC kicked into life and a few desultory barks for political gain, then ordered to lie down again lest it upset the neighbourhood.

      Federal ICAC needed… NOW!

  7. 0
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    I agree it’s time that the superannuation industry was looked at, nothing serious has been done since the Keating government made this legislation to help all Australians. From stories told on this site previously, there are many reasons to validate a complete overhaul of the system and maybe revamp the legislation. Surprisingly, I don’t agree with MICK’s continued promotion of industry funds as if they are squeaky clean. All funds may be, in some way, overcharging the members and there is no proof that any fund is exempt from sharp practices.

    • 0
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      I’m pretty sure Mick doesn’t say they’re all squeaky clean and all the top performers – just that they make up the vast majority of the top performers…

      I personally have long directed my comments at the entire gamut of superannuation funds and the current social security and Futures Fund – all needing to be brought under one roof and out of the lying hands of politicians and their mates, including politicians past, who should just quietly fade away and suck deeply on their huge ‘superannuation’ and leave the rest of us alone.

    • 0
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      You wouldn’t OM because you are in the LNP corner.
      The facts are clear. Industry Funds are slaughtering Retail Funds. Only the most blatant liars amongst the trolls would ever deny that. It is an irrefutable FACT!

    • 0
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      Are you related to Old Geezer MICK? He is usually the one who generalises. Yes, some industry funds are achieving a higher rate than some retail funds but not all industry funds are better than all retail funds.

      But MICK, this article is not about returns, it is about the cost to clients of the fee structure and the lack of transparency in the superannuation industry as a whole. If there is nothing to hide then the Royal Commission will find nothing but I’ll bet parts of my anatomy that all sections of the industry will need to change.

    • 0
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      **laugh** Mick related to OG….

      Yes – not all industry funds are at the top – just more than retail …..

      And yes the fee structure in any super fund is excessive and a money-making scheme – not a genuine for-the-contributor scheme at all…. unless you are covered under the Future Fund or State government super schemes or Big Boy super schemes for the bosses in industry – all of which are subsidised enormously.

      The government, on the other hand, failed to guarantee a certain level of return for all schemes – unlike its own highly favourable one.

      Too many different rules…. and clear distinctions between the ‘lifters’ and the ‘leaners’ – forgetting that the ‘leaners’ do all the hard work….

  8. 0
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    When Financial Sevices & Revenue Minister Kelly O’Dwyer announced that she will legislate to have 3 or more “independent” members added to Super boards because unions are over represented and block access to money that retail funds and banks could employ more efficiently. O’Dwyer’s fixation on this remains despite having her claim that retail funds outperform industry totally discredited. She persisted with this lie and her unstinting stand that the Royal Commission was a waste of money and nothing to see here. Given what has been exposed at the RC of banks and AMP fund management would make her want to drop it at speed. Now James Shipton from ASIC is getting in on the act and in his statement implies ALL sper funds have been exploiting members and not being transparent. Industry funds ARE transparent and their fees and charges are out there and reasonable. My super churned 4 times as the insurance companies were taken over or sold with the top end taking golden handshakes out of the super. I finally gave it the flick when the whole premium was swallowed up to pay for planners I had never met. What was there to ‘plan ‘ when I can’t access it for 35 years? All there was for them to do was getting the money to where it would return and show growth and accumulate. Mine went backward and releti es went ahead by factors. Trailer comissions and life insurance even after the rep died was still leaking to him. Now K. O’Dwyer has a boss, PM Trumble (trumpism) and the bods in the LibNats. Is she the dummy and PM the organ grinder? Why would ASIC blanket ALL super funds when Industry wipes the floor with retail, bak and insurances? Our only hope is to pre-empt O’Dwyer in the next general election and send the whole bunch off to collect their super and Parliamentary pensions and to the back bench in Opposition. To bookend this, the extra members to the board from bank and political backgrounds will want to be renumerated not at the peppercorn rates the current i dustry boards pay. We will be up for hundreds of thousands across the sector and by the time the battlers get to collect they will be hundreds of millions out of pocket especially after some of their influences crash out. Peter Costello wants to collapse ALL funds into one and use it to dole out subsistence pensions and end governments pension transfers. Alarmist? I wish.

    • 0
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      Just a blatant takeover of industry funds so the banks can get their hands on the money.

      The answer is no O’Dwyer… now go back to kindergarten – the public aren’t that stupid.

      Are there to be three ‘independent’ people on all retail funds as well, including Union hacks and maybe a pensioner or two?

      I doubt it…. typical of the lying Liberals to imagine they have some divine right to dictate to everyone they want to – but not equally across the board.

    • 0
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      While the Trebor Scheme is similar to that of Don Pedro Castella (of El grande Republica da San Austrador, por favor) – by no means would pensions be ‘subsistence’ level – but would adequately reflect living costs and allow additional superannuation top-up to a specified limit and no more.

      All your savings and investments outside of that then become subject to taxation review and possible taxation – including the freebies your ‘past’ company gives you into the millions…

      That way everybody gets a basic and can save for extra within limits – but no more rorts to favour the fat cats… and that includes the Future Fund and all ‘superannuation’ derived from it….

    • 0
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      I don’t like your scheme at all Trebor as it lacks incentive to do better. It is just so limiting and would force people off shore into tax havens real fast.

    • 0
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      You can do better, OG – just not by taking unfair advantage of concessions and privileges involved in providing a universal retirement package…

      You are always welcome to put your investments elsewhere and pay your dues, while reserving a basic Pension + ceilinged super contribution as the base for your retirement.

      When you invest, it should be treated as a business … not permitted all kinds of freebies and loop holes to pay no tax.

    • 0
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      Correct LieDetector. The more you look at it the more Turnbull and his cutthroat government are trying to take over Industry Funds like they have Retail Funds and turn them into the next big end of town cash cow. Members need to resist this.
      Use the ballot box. That what it was always intended for.

      You wouldn’t like TREBOR’s view OG. It is fair and sensible. As for offshore tax shelters these should have been closed years ago as they are a fraudulent instrument put in place for the rich to avoid paying fair tax in their country. Perhaps they need to be shown the door. Starting with our own PM.

    • 0
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      Anyone resident of Australia with an offshore account pays $30% on any transfer offshore or back onshore…..

      We have our exits and our entrances….. and one man in his time pays many taxes….

      ALL ‘first world’ nations that are suffering from ‘tax havenitis’ are moving to close those doors…… most of them just haven’t had the balls to decide what to do and then do it…. that kind of rapid forward movement requires a Castro – and he gets labeled a
      Communist for putting Cubans first….

      Get out and about – see how the world really works…. then we’ll talk….

    • 0
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      O’Dwyer is correct. The banks can utilise the worker’s money better providing long term funding to prop up their dodgy books and over indulgent lending over the past two decades.

      Someone has to cop the losses and it won’t be LNP mates. It will be the workers again.

      The biggest mistake is thinking they give a damn about you other than you being a money milking machine. Once that’s over you’re a liability.

      Especially all the ones who insist on Fix interest “safe” investments haha. I’ll bet a lot of advisers have clients in those positions making money for the banks, paying fees and earning under 2%.

  9. 0
    0

    With super funds their are lots of mouths to feed. You put money in and get charged a fee. Your advisor gets a fee. The person deciding where your money goes gets paid a fee. The person investing you money gets paid a fee. The person making sure and changing your investments gets paid a fee. The person reinvesting your money gets paid a fee. The person doing all the book work and accounting gets paid a fee. OH I forgot the person sending out your statements by email or snail mail also gets paid a fee.

    No wonder you have nothing left when you retire.

    • 0
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      So a one-stop shop would be ideal?

      Thanks, OG…… like privatised roads and power etc, once the one-stop government shop was cheaper and more efficient and required far fewer ‘staff’, board members and overpaid executives to feed…. and NO gluttonous shareholders and opportunities to rort taxation due via franked credits on which nobody pays tax.

      Worked wonders….

    • 0
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      Ha aha Trebor showing your ignorance of what franked credits are once again I see. Get your facts right man.

    • 0
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      Actually OG YOU are showing your ignorance.
      Example: I earn $1000 and employ somebody to do some work for me. With the payment that person employs somebody to do some work for them.
      Please tell me where I get a franking credit because all 3 of us are paying tax on our income? Please don’t start with the GST as this is not income tax!
      You are right TREBOR. I use the imputation credit system but it is a special RULE which only exists in Australia and was once again…..wait for it…..put there for the top end of town to suck suck on the system. It should go!

    • 0
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      Blatantly obvious that Trebor and Mick are rusted on labor who do nothing but criticize the LNP government
      Been reading all your post the last few days and it’s clear that you 2 are labor trolls
      Sad

    • 0
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      Nah – I just set you up – “franked credits on which nobody pays tax.” is a part, not the whole – and you fell for it hook line and sinker.

      I note you didn’t deny that this occurs – I’ve read the blurbs – and it seems that a company may voluntarily pay tax on franked credits……… and we all know there is murk in this practice – or it would not even be there in the first place, just like trust funds.

    • 0
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      Not at all, olbie – I stick it to all political parties equally – and vote for none – I don;t hide behind any Mr Pike – “Moi Politicks is Moi own concern!”

    • 0
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      Trebor franking credits are tax paid by a company and are not created out of thin air.

    • 0
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      I am aware of what they are, OG – the theory is that the company pays 30% to the ATO in advance against the shareholders future tax – just like company tax – and it is supposed to ensure that the 30% is safeguarded so the ATO can collect it if necessary, and it is supposed to be included in all income for the shareholder for tax purposes, and a possible refund given if required in the reviewing of overall tax burden.

      Once again – it seems that in too many cases this is not what is occurring and it has become an automatic refund of that 30% – meaning nobody is paying tax on those shares.

      The whole issue needs looking into very closely – and if there are too many problems – let everyone just pay their own tax and see how they find that.

      Theoretically if the company pays tax as part of its taxation liability, and uses share payments as a deduction, there is no reason for a shareholder to not pay tax on that money.

      Somewhere along the way – some of this is being rorted – and if you are one of the honest taxpayers operating with a honest share-paying company- you will not be caught up in any changes at all.

      Dividend imputation is not and should never be an automatic return of 30% to the shareholder…. and it appears some of ‘the big boys’ – from whom your kind are excluded – are basically cheating.

    • 0
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      If you like it this way – dividend imputation on shares paid is the same as tax withheld on behalf a PAYE worker – it is part of gross income and not a separate figure at all.

      If it is being treated as a separate figure from gross income – it is a rort.

    • 0
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      The mere fact that many bodies suggest it as a ‘tax minimisation strategy’ is enough to indicate it is being rorted…. same as trust funds.

    • 0
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      While dividends have been popular and lucrative OG they may not be so great going forward.

      I only hold that one direct share in Origin and they stopped dividends two years ago. I’m switching to solar panels. More reliable after all.

      Cutting losses is part of it as you know.

      I’ve made 23% on foreign indexes just straight old fashioned sharemarkets last financial year.

      Mostly capital gain which may be something you consider.The halving of that tax was a gift to investors.

      Dividend plays in Australia may be losing gloss with added sovereign risk. The ASX isn’t so terrific now either.

      It’s getting harder to know which banks are in strife. Holding a lot of bank shares is a pretty big gamble at debt levels of 200% GDP.

      There should be no entry or exit fees at all for superannuation. At least let those sucked in get out with a bit of capital left is my opinion.

    • 0
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      olbaid, disagreeing with someone makes a person neither a troll nor a supporter of one particular party. A mature and reasoned argument is more productive than mindless name-calling.

  10. 0
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    At the end of the day the only thing that matters is nett returns
    So long as my retail funds continues to average returns of over 10% I’m happy
    But I would like to see all funds made to publish exactly how those returns are made up for each individual asset class

    • 0
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      I am in an Industry Fund that does exactly that and includes the fixed annual charge as a percentage of the fund value. I converted my Industry Super Fund into an income fund 5 years ago and have drawn a good income with the balance increasing every year since the conversion. Having Union input on the board has done no harm in my case.

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