26th Jun 2018
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Superannuation only doing half its job, says Challenger
Author: Ben Hocking
‘Super only doing half its job’

The superannuation sector has reached ‘critical mass’ but its ability to meet post-retirement needs remains underdeveloped, according to leading investment management firm Challenger.

In its submission to the Treasury consultation on retirement income, Challenger’s retirement income chairman Jeremy Cooper called for superannuation to work harder for those who have retired.

“Providing income in retirement is fundamental to the purpose of super, but currently there is no retirement-specific governance framework,” Mr Cooper explained.

“Our super system is more mature than most people realise. It’s doing the first part of its job, allowing people to accumulate assets through their working lives, with typical household super wealth at retirement in the $350,000-$500,000 range and increasing.

“This wealth was accumulated to provide income in retirement, but the system is not yet set up to do this next phase successfully.”

Mr Cooper explained that Challenger supports the recent Treasury proposal to introduce a covenant in the superannuation laws to ensure the legislative arrangements for the retirement phase of super keep pace with the size and importance of the system.

The Challenger submission says that the Treasury proposal that superannuation funds assist older members by developing a retirement income strategy for the fund will plug a significant gap in the Superannuation Industry (Supervision) Act. Currently, retiring members do not have the benefit of such a provision and neither do fund trustees.

The submission adds that the development of comprehensive income products for retirement (CIPRs) will provide better outcomes for retirees by delivering higher income through pooling mechanisms that reduce the risk of running out of money in retirement, as well as the benefits of longevity protection and capital flexibility.

Mr Cooper said that the CIPR proposal was not a revolutionary change, but a necessary enhancement for a system that will have $1.3 trillion heading toward retirement by 2030.

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    COMMENTS

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    27th Jun 2018
    10:18am
    Industry funds are the problem - not flexible enough or provide enough options
    Run by bureaucrats who are proficient in ripping off union members rather than managing complex financial investments
    Old Geezer
    27th Jun 2018
    10:39am
    If I could not have SMSF I wold not have super at all.
    Anonymous
    27th Jun 2018
    11:08am
    Cant wait for Mick's contribution - all a capitalist plot to keep the underdog poor!!
    Old Geezer
    27th Jun 2018
    11:18am
    Me neither but hopefully not another plug for those union run industry funds.
    Anonymous
    27th Jun 2018
    11:25am
    You can be sure he will OG - he is a one trick pony, with massive egg on his face after yesterday ridiculing MT - the same day it was reported that MT donates his entire parliamentary/PM salary to charity. Poor old Mick epitomizes the politics of envy - cant stand to see other people succeed, and determined to pull down those perceived to be doing better than themselves. What a miserable life they must lead!
    Cowboy Jim
    27th Jun 2018
    11:40am
    OG - most people have no option to have super or not - unless you are self employed and there your SMSF might come in. In my day I was told which fund I had to get my money into. Even where my salary was paid into was down to 3 choices to select - the boss told me!!
    Old Geezer
    27th Jun 2018
    11:42am
    I agree they must lead a miserable life indeed worrying about who has what and who may have more than them. My best friend is very wealthy but our friendship has nothing to do with wealth at all. They often say to me that I treat them as an equal and not as some body important like others do.

    BS has even more egg on his face after his dumb decision to rescind the tax cuts. Social media is giving him a real caning over it at the moment.
    roy
    27th Jun 2018
    4:36pm
    Big Al. let's see how long it is before he mentions Hitler again or calls all those who disagree with him, LNP trolls. He really is a cracked record is he not? Oops,wait for him to report me or us.
    TREBOR
    2nd Jul 2018
    3:22pm
    Let me pick myself up off the floor there, Rafe.... 'industry funds are the problem' , 'proficient in ripping off union members rather than managing complex financial investments ' ....

    That's why they have bigger returns overall and in the majority of their cases.

    (still laughing).....
    Old Geezer
    27th Jun 2018
    10:38am
    Looks to me like Challenger wants another scheme to fleece retirees.
    Rae
    27th Jun 2018
    1:01pm
    Thought exactly that OG. More complexity, rules, regulations and ways for the Industry to keep hold of the money.

    Mr Cooper is suggesting something like a defined benefit at the end of an accumulation scheme. Good luck with that haha.
    Sundays
    27th Jun 2018
    2:12pm
    A lot of fancy words here, but at what cost. There is nothing wrong with an allocated pension. Yes, it might run out if you don’t have enough in super, or draw down too much. However, it’s easy to understand whereas I have no idea what pooled resources mean. If it’s not clear what is on offer, steer clear
    cupoftea
    27th Jun 2018
    11:24am
    If i wasn't happy with my industry super I would change it I don't need another tory bastard who wants to get there hands on it telling me what to do
    Old Man
    27th Jun 2018
    11:26am
    Is it just me or have others noticed the pie in the sky thought bubble?
    "The submission adds that the development of comprehensive income products for retirement (CIPRs) will provide better outcomes for retirees by delivering higher income"
    What are these mythical products that will consistently give a high return? I note that there is just the statement without any supporting plan to achieve such a return for retirees. If they come up with a foolproof plan, they might also give us the Lotto numbers for the next draw.
    Old Geezer
    27th Jun 2018
    11:36am
    Higher income for who? My guess is not the retirees.
    Anonymous
    27th Jun 2018
    11:37am
    Very perceptive OM - I think the only way to beat Challenger is to join them!
    MD
    27th Jun 2018
    11:42am
    If only, Old Man. Trying my best to recall one foolproof plan devised by the hand of man. "The best laid schemes o' men an' mice/ Gang aft agley." Still, it shouldn't stop us from trying eh ?
    Rosret
    27th Jun 2018
    11:44am
    Oh yes, Old Man - our entire business philosophy seems to be based on the pyramid interest gained model and not on bricks and mortar productivity growth. It is such an artificial measure of wealth and I really worry how long it will be sustainable.
    Cowboy Jim
    27th Jun 2018
    11:45am
    Who knows whether Challenger is that secure into the future? Looking at the disclaimer in very small print at the bottom of their advertisements, your investments are not guaranteed. Hope they are there for the duration and wish them well.
    Rae
    27th Jun 2018
    1:03pm
    Yes indeed OM.
    Rosret
    27th Jun 2018
    11:35am
    OK question. What do they mean by critical mass? Given 1 trillion is $1 000 000 000 000. Now everyone should be aspiring to the $1m which is $1 000 000. A quick division and that would be 1 million people. How many people are in retirement or close to retirement?

    In actuality on the 2011 stats there were approx 8 million Australians over 50 years of age. So that is approximately $125 000 each. So what is critical mass? We are in big trouble!

    Imagine if the Government had controlled the superannuation. We would have had a guaranteed payout for life and the fees would have remained in Australian's hands. The government does have time to fix this before the next generation comes through - but they have to do something now!
    Old Geezer
    27th Jun 2018
    11:50am
    Rosret it is our money in super and no way should the government control it. I for one would not have any super if that was the case.
    Rosret
    27th Jun 2018
    12:09pm
    OG the government had very successful retirement plans with DFRDB, the public service, Telstra, teachers etc. They are much better than what my private fund has returned.
    Anonymous
    27th Jun 2018
    12:14pm
    OG the thing that concerns me is how many people have no idea what their investment options are, in relation to their super fund balances, and what those options mean, in relation to risk. I have many friends/acquaintances in their mid to late 50s who have asked me to explain it to them, and so many of them don't realize they are sitting on a financial time bomb, in the event of a prolonged equity market downturn. There is a helluva big difference between a growth and cash option, for example. This is the advice that industry/retail fund managers should be imparting to their members, to ensure that each fund member is invested appropriate to his/her risk profile - I bet Challenger aren't too interested in that sort of education!
    Old Geezer
    27th Jun 2018
    1:00pm
    Some funds invest your super depending on your age and if you want to invest it differently you can choose to. I saw one recently that was doing better in a balanced fund than the high growth fund they had that person in. So we changed it to the balanced fund as it was silly to take on more risk for the less of a return.

    I agree though many people don't even know where their super is let alone where it is invested. I had a young fellow ask me to find out where his super was going as it was on his payslip. He asked his employer where they were putting it and he was sacked without reason. On contacting the ATO his employer was not putting in super for any of it's employees. This fellow has been sacked for over 12 months now and they are still drip feeding in his super. I have to admit though the ATO have done a good job sorting it out for him and keep him informed what is happening with it.

    Since I have been working with young people with employment issues I just can't believe some of the things employers try to get away with as they seem to play on the ignorance of their employees. I just wish this stuff was taught in school instead of all the other rubbish they teach kids.
    Rae
    27th Jun 2018
    1:08pm
    Rosret did you miss the discussions about the Welfare Fund and how it was stolen. That was exactly what you are talking about. Damn Fraser.

    Mr Cooper is also wrong about Superannuation having the purpose of providing income in retirement. It was set up to supplement the aged pension not to replace it.

    All these people, with poor understanding or knowledge of history or economics are dangerous when they come up with these distorted comments and ideas.
    Rae
    27th Jun 2018
    1:20pm
    OG Financial literacy should be taught and employers should do hard gaol time for this sort of fraud to dissuade others. A hit in the wrist with a wet lettuce, drip feeding doesn't cut it. Their assets should be taken, sold and paid out to defrauded workers and also that gaol term too.
    Triss
    27th Jun 2018
    1:44pm
    It’s never a good idea to let government control retirement cash. “Those who fail to learn from history are doomed to repeat it”.
    Sundays
    27th Jun 2018
    2:22pm
    Yes OG, some employers are not fulfilling their responsibilities. I did a tax return for a young receptionist who asked if she could claim for buying small supplies for the office with her own money. The staff took in turns as the boss had no petty cash. This was a medical practice!
    Eddy
    27th Jun 2018
    11:42am
    The reality is that I do not really understand what they are talking about, but I can assure you of one thing, I would never put my super into a retail fund. If, as Raphael asserts, union 'bureaucrats' are proficient at 'ripping off union members' (which I seriously doubt)what does he/she call the banks and so called 'wealth management' organisations whose retail super funds have been ripping us all off, 'super proficient'. As is said, the proof of the pudding is in the eating, and the proof of super funds is in the returns to members, whiuch industry funds win out on every criteria.
    Old Geezer
    27th Jun 2018
    11:52am
    SMSF s do a lot better than industry funds too. Those in the pension phase in industry super funds should not be paying tax but the returns they get are not reflecting this at all.
    Rae
    28th Jun 2018
    8:29am
    It's a beat up by the media Eddy. Industry funds have board members from the employer as well and often some independents as well with specialist skills. The idea that an Industry Fund is made of just unionists is silly. On the other hand I'm not sure about retail funds, Those board members seem to be on quite a few boards as a sort of boys( the odd girl) club.
    Old Geezer
    27th Jun 2018
    11:46am
    Super to me is just another investment vehicle that gives me certain tax advantages over other investments. If those tax advantages get taken away and it costs me more to have super than I get by having it I will no longer have super. Many people like me think the same and want their super where they can control it and make those easy decisions without any obstacles in the way. BS wants to get rid of SMSFs as he doesn't want people themselves to have control over their own super.
    Rae
    27th Jun 2018
    1:25pm
    At some point it becomes far safer to move funds out of Superannuation and just happily pay tax on any returns over the $50 000 or so tax free you can earn.

    They just won't leave it alone. Too much money itching to be consumed by the financial and insurance industry.
    Old Geezer
    2nd Jul 2018
    3:34pm
    If they don't give us back our franking credits super will cost more to have than what it would outside super.
    MD
    27th Jun 2018
    11:49am
    Anyone else considered that gubbermint may just be buttering us up prior to taking control of the massive funds currently held in super ? Maybe it's just me and my pessimistic doubts and paranoia when institutionalized 'talking heads' start laying on the lard instead.
    Old Geezer
    27th Jun 2018
    11:53am
    Mine will be out of super before they get their grubby hands on it.
    Old Geezer
    27th Jun 2018
    11:54am
    I tell everyone now not to put any more than they have to into super and invest it elsewhere as it may not be yours when you retire.
    Old Geezer
    27th Jun 2018
    11:55am
    Another thing that worries me is the clamp down on people using super for weight loss surgery. Many of these people wont live to retirement so what is really going on here?
    Rosret
    27th Jun 2018
    12:13pm
    I agree with you OG on that one. I most definitely tell my kids to invest in real estate rather than super. Its easy to see in hindsight.

    Re weight loss - why aren't the government paying anyway. It may force them to address what is being served to us as food in the supermarkets.
    Old Geezer
    27th Jun 2018
    12:25pm
    I tell my family to invest outside super too. My kids are a lot wealthier than me and have all sorts of investments.

    I agree the amount of junk food in supermarkets is ridiculous. I often wonder who actually buys than stuff as I skip half the isles in a supermarket. We hardly eat out as we don't like the food in restaurants either. It was funny the other day was a bit cold and we had some beef stew leftover so we made some meat pies. I can't remember tasting a nicer meat pie.
    KSS
    27th Jun 2018
    1:11pm
    Just because the stuff is offered in supermarkets does not mean you have to buy it Rosret. There are literally thousands of products offered in my local supermarkets that I have never bought in the past, do not buy now and will not buy in the future.

    Except for a very small minority of people with very specific health issues, being overweight and/or obese is a choice people make with the lifestyle they choose. It is not for the Government (or rather taxpayers) to pick up the tab for others' poor choices. There are enough demands on the health dollar from unpreventable diseases without the added burden from self-inflicted lifestyle obesity.
    Rosret
    27th Jun 2018
    1:34pm
    KSS you have the benefit of education and probably being bought up on a good diet.
    There is an entirely new generation who have been feeding themselves on fast foods and know of no other way. ...but we are getting a little off topic here.
    We do pick up the tab for cancer of the lungs and cirrhosis of the liver and they caused by life style choices too. You could argue we shouldn't pay to fix dental cavities either as they are caused by eating too much sugar etc etc.
    cupoftea
    27th Jun 2018
    12:24pm
    when I work out how long my super will last I work it out on the cash I have got so you don't rely on interest and you work out for the past 4yrs what you spend monthly,weekly and then at the end of each year add 5%cpi I know exactly what it costs me and how long my super will last it must be good the LNP is telling us what is going to happen in 2024 ask them for the lotto numbers cos you will need them with them
    Old Geezer
    27th Jun 2018
    12:48pm
    As long as my super earns more than I take it out it will last longer than me. Hopefully I'll get the chance to take it all out before I depart this mortal world so that it is easier to sort out my will.
    Rae
    27th Jun 2018
    12:58pm
    Sounds like Mr Cooper is suggesting a Ponzi Scheme with his industry collecting the cream off the top.
    The Greed just goes on and on.
    Old Geezer
    27th Jun 2018
    1:01pm
    That was my first thought when I read it too.
    Sundays
    27th Jun 2018
    2:27pm
    It can’t be anything else!
    auldtic
    27th Jun 2018
    1:55pm
    Raphael stated
    "Industry funds are the problem - not flexible enough or provide enough options
    Run by bureaucrats who are proficient in ripping off union members rather than managing complex financial investments"

    As a retiree who paid into an Industry Fund and am now reaping the benefit, my I suggest Raphael is either genuinely ignorant or just a bit silly.
    Old Geezer
    27th Jun 2018
    2:13pm
    Raphael is right I took my super out of a couple of industry funds about 20 years ago as they were not performing well. After seeing the performance of my SMSF I would have been very disappointed if I had left my super in those industry funds. Yes both funds appear regularly in the top 10 funds.
    Anonymous
    27th Jun 2018
    2:15pm
    Oldtic - You don’t know how much you were ripped off but that’s ok
    Opportunity lost
    Triss
    27th Jun 2018
    3:04pm
    Sarcasm, Raphael, is not useful or productive for debating this topic.
    Abe
    2nd Jul 2018
    8:49pm
    Oldtic,

    There is no question about it, Raphael is "genuinely ignorant" and more than "a bit silly." You will notice Old Geezer agrees with every bit of nonsense Raphael spouts.

    Industry funds are doing very well at the moment, and I am glad you are now "reaping the benefits."
    floss
    27th Jun 2018
    4:43pm
    The greed is good gang are quick off the mark today they filled the first three placings.Now the fair dinkum people can have their say.
    Cowboy Jim
    27th Jun 2018
    7:43pm
    If that is the case floss, now it's your turn to say something. Please take the floor!
    roy
    28th Jun 2018
    9:26am
    Do you include MICK in the fair dinkum people floss?
    Old Geezer
    2nd Jul 2018
    11:16am
    Ignorance is bliss.
    TREBOR
    2nd Jul 2018
    3:20pm
    Waal, Pilgrims - when ya only let it do its job fer half the time required ta build that fence - ye're only gonna get half a fence.... then when yer managers take tha cream off it....


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