This week’s Productivity Commission recommendation that an expert panel decide on the nation’s top 10 superannuation funds could be counterproductive, according to comparison site SuperRatings.
“If the outcome is to reveal what a good product looks like … then there has to be a clear focus on the panel members being truly independent,” SuperRatings chief executive Kirby Rapell told YourLifeChoices.
He said his organisation, which regularly publishes lists of the best-performing super funds, has not been approached yet to sit on the panel.
The panel will be chosen by the Government, which has already raised questions in some observers minds’ that some of the positions may go to ‘mates’ with vested interests in certain outcomes.
Mr Rapell said that rate of return may not be the only metric of performance measured in order to qualify for a top-10 position. If it were the only criteria, then virtually all the top performers listed would be industry funds, as they consistently produce higher returns than funds owned by banks and private financial institutions.
Among the other metrics that may be taken into consideration are the sustainability of the fund, insurance policies, fees and long-term strategy. This may leave an opening for some retail funds to jump onto the list.
Hopefully, no metrics will be taken into consideration that allow Australia’s worst performers to get a foot in the door (see list below).
“Up until now, a new worker who did not select a fund was automatically signed up to a default, which was generally an industry fund named in their EBA (enterprise bargaining agreement),” Mr Rapell said. “But if the commission’s recommendations are observed, no funds will be listed as a default in EBAs.”
This move will steal some of the industry fund sector’s clout going forward, he said.
The Productivity Commission’s report into the efficiency and competitiveness of Australia’s superannuation sector uncovered what Financial Services Minister Kelly O’Dwyer called “a massive rip-off” earlier this week.
The report said that close to $4 billion was being lifted from Australians’ nest eggs each year from a combination of fees, flawed insurance policies, poor returns and lost or duplicated fund accounts.
The commission’s call for the sector to be cleaned up has had mixed reviews from both the industry and retail super quarters. Each risk either losing their hallowed positions or being forced to change business-as-usual models.
The review of the sector will see competition among the 200 existing funds ramped up, but eventually many of them may have to fold because they cannot compare with the top 10.
“Those at the bottom quartile for long-term returns will be the biggest losers and typically you could say that encompasses about 10 per cent of the sector,” Mr Rapell said.
The commission has refused to identify which funds are likely to be ‘encouraged’ to merge or fold. But a list published on the Australian Prudential Regulation Authority's (APRA) website has thrown some light on the 10 worst performers on the basis of their 10-year returns. At the bottom of the list are:
- Super Safeguard Fund: -5.7%
- Lifefocus Super Fund: -1.4%
- Aon Eligible Rollover Fund: 1.1%
- Netwealth Super: 1.2%
- Smartsave ‘Member’s Choice’ Super: 1.5%
- Super Directions Fund: 1.7%
- Oasis Super: 1.7%
- EmPlus Super: 1.8%
- AMG Super: 1.8%
- Symetry Personal Retirement: 1.8%
An APRA spokesman told YourLifeChoices that no-one should rely purely on its data when choosing a super fund. He said that the list showing the best rates of return for super funds doesn't necessarily indicate that they are the best funds.
"The best performing funds may not suit the particular needs of certain people. For instance, they may have higher fees," he said.
"APRA always urges people to examine a fund's features carefully and seek guidance from a financial adviser before switching."
Are you a member of one of these funds? Have you checked the returns you are receiving from your super fund yet? Are you happy with your fund’s performance? Are you content to trust that your fund manager knows what it is doing with your savings?
This article was updated with information from the Australian Prudential Regulation Authority at 10.30am.
All content on the YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regards to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances. Financial comments provided by readers cannot be relied upon as professional advice, because they are not verified independently by YourLifeChoices.
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