Peter Costello calls for Government control of default super

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Former federal treasurer Peter Costello has proposed that the Government should take more control of super, specifically, how default funds are managed.

Default super funds are those chosen by an employer when an employee does not specify to which organisation they want their super paid.

Speaking at an event last week, Mr Costello said that default super should be managed by the Government, similar to how the Canadian Pension Plan Investment Board (CPPIB) system works.

He believes that allowing the Government to control default funds would eliminate the fight between industry and retail funds for the right to default super and would be a vast improvement on the current arrangement.

“Instead of the government arbitrating between industry funds and private funds, there is a fair argument that this compulsory payment should be allocated to a national safety-net administrator – let us call it the Super Guarantee Agency – a not-for-profit agency,” said Mr Costello.

“There would be huge economies of scale. It would end the fight between the industry and the profit sector over who gets the benefit of the default funds,” he said.

“A bigger pool with economies of scale and access to the best managers would likely drive down costs and drive up returns – it would be in the interests of all, except of course the fund managers,” said Mr Costello.

“Neither sector has been able to attract the money voluntarily. It exists by reason of government fiat. The government has decided it should go into the super system – it could show some interest in managing it in a cost-efficient way.”

However, the Association of Superannuation Funds of Australia (ASFA) doesn’t agree, saying that Mr Costello’s idea would be the equivalent of nationalising superannuation.

“In the context of the broader public debate around the efficiency and competitiveness of the superannuation system, it is almost inconceivable that anyone would countenance a government monopoly delivering the best retirement outcomes for Australians,” said ASFA Chief Executive Martin Fahy.

“What is being proposed is in essence the nationalisation of private, individual superannuation savings.

“The Future Fund effectively operates as the Australian Government’s wholesale investment manager. However, it lacks the required governance framework and administrative capabilities needed for it to operate in a superannuation context.”

Mr Fahy doesn’t believe the Government would be as effective as the current arrangement, and that the $900 million invested in the SuperStream program would be wasted.

“Mr Costello’s proposal would also require the government to set up and operate a centralised facility to undertake administration functions for the government-run fund. Effectively, this would see administration services for many member accounts transferred from private sector operators to a government administrator,” said Mr Fahy.

“Entrusting administration to a government-run entity would reverse significant efficiency gains delivered through the government’s SuperStream program, which sets very high standards for private administrators.”

“It would also require faith that government could deliver more efficient, effective and reliable administration services than the private sector,” he said.

“The reality is that transferring administration functions to a government body would create single-point-of-failure risk for members.”

What do you think of this idea? Would you like to see a system where less money is diverted to fund managers and more put into your pocket?

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Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?

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52 Comments

Total Comments: 52
  1. 0
    0

    I presume that this money would be as safe as my government pension fund that I paid into for 55 years only to be told I am not eligible to get any back as my industry super fund did too well.There is no way that the government would be able to keep their hands off this money,they do not have the integrity.If you want to see less money diverted to fund managers and more in your pocket join an industry fund.

  2. 0
    0

    One question – does ANYONE believe the govt would actually do anything to help the ordinary person? Yeah right. Firstly, they would ensure their own pension was exempt from any govt management. And secondly, for money that we have salary sacrificed, that is OUR money, and no way should the govt have ANY control over MY money.

  3. 0
    0

    I wouldn’t trust anything this LNP government set up – it’s a greedy grab for anything they can use to plug the deficits caused by their own fiscal mismanagement. The only pensions and superannuation payments going up is their own, while they blow a further hole in the Budget. I have worked for the government, and would rather see my super managed by the semi-private sector!

    • 0
      0

      100% agree!!! The Lieberal Nazi Party are greedy, inept bunglers, who are totally blind to the fact that we live in a society, not just an economy. They are tenth-rate beancounters/

    • 0
      0

      Labor /Greens are no different so don’t place your trust or faith in those parties either. There are far better alternatives, parties that have a Nationalistic approach and put Australia and Australians first and foremost. Lib/Lab/Greens need to be buried once and for all, traitors all of them to our once great country.

  4. 0
    0

    I read this on the weekend.
    Allowing this government in particular to control superannuation accounts is paramount to giving Dracula the keys to the blood bank. This lot and Labor as well have been circling the money pot for years trying to work out how they can get their grubby little hands on the loot. I have long said they will nationalise super to achieve their aims. Then expect the bastards to spend/waste our money the same as they did with the pension system which was funded by workers and then rolled into consolidated revenue and spent.
    This has nothing to do with helping anyone other than governments which want to spend like drunk sailors and leave us all destitute when we retire. ANybody who believes the lie Costello is spinning deserves what they are going to get. Its deceitful and well thought out.

    • 0
      0

      At least Labor introduced compulsory super for the benefit of all.

    • 0
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      Costello was the one who initiated all the incentives to promote private superannuation funds. He was an excellent Treasurer and I think a nationalised super fund would be a sound idea.
      The downside would be a future government selling it off.
      It would save millions in fees and we would actually get the true investment returns as opposed to the amount the private funds choose to give us.
      It could be coupled with a manageable fortnightly payout as the old super funds used to provide. It would give so much more security and financial confidence in our retirement years.

    • 0
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      Very very short sighted Rosret.
      First thing Costello was treasurer when the country was going gang busters. Remember the ‘Baby bonus’. That produced young girls getting themselves pregnant to collect the $5000.
      Second thing is superannuation. Why do you think the bastards want to change the current arrangements? Black and white. They want to get some of the action. You would know that.

  5. 0
    0

    In my latter years of work, I worked a lot of casual jobs with different employers and because of their choices, I had a number of super funds. Each one attracted fees and as a result I was being charged more than if all my super was in one fund. A lot of places I worked had EBA’s that included all employees paying into an industry super fund. Nothing wrong with that except it took away the right for an employee to decide which super fund was better for them. I don’t agree with super funds being held by government but I would like to see that employees had the choice as to where they wanted their super funds invested.

    • 0
      0

      Must have been before 1.7.2005, because since then most employers have been required to give their employees a choice of fund for their superannuation guarantee contributions. It is only if the employee fails to choose, or chooses a fund which cannot be used by the employer, that the employer will be able to choose the fund.

    • 0
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      Yes it was sunnyOz, glad to see that the problem has been fixed. Thanks for your comment.

  6. 0
    0

    Just imagine. Another incompetent shiny arse government department to urinate ordinary workers hard earned money up against the wall. Governments of all sides want to get their grubby hands on the large pool of super savings. I would not give any government the stink off my feces much less any control of my super.

  7. 0
    0

    NEVER give gov control of any type of super. You would completely lose ALL control over your own funds. This talk of giving them control over “default” funds is just the thin edge. Once they get that it won’t be long before the case will be made to give them control over all. Can you imagine what will happen to your money then. Big salaries(even bigger than those paid now) to the beauruacrats who will run it. Huge gees going to gov.
    Just DON’T allow this to happen

  8. 0
    0

    I have a feeling the government would treat my super like it’s their money and after a few years like the government pension they would act like they are doing me a favour by giving me any. So many greedy eyes on our super.It’s my money they can go to hell.

  9. 0
    0

    Great idea Peter. Now how about the same for Health Insurance.

  10. 0
    0

    Hahahaha…trust the government with your money…?

    NO

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