ASFA rejects Future Fund as better place for super savings

ASFA refutes claims that Australians would be better off if their retirement savings were invested in the Future Fund.

Last month Peter Costello, Chair of the Future Fund and former Federal Treasurer, supported having a single national administrator for super savings, and suggested the Future Fund could do the job. However, according to the Future Fund, this was said in his personal capacity, and that the Fund has “no plans at all in that area”, The New Daily reports.

ASFA says the Future Fund is a “perfectly good sovereign wealth fund, indeed an excellent one, but this does not make it a natural candidate as the investment manager for default super or all super investments”.

“The Future Fund is well managed in terms of its investments and has delivered good returns, particularly, reducing the volatility of returns from year to year. However, its outperformance of the average super fund is nowhere near what is claimed by some commentators.”

“It should be noted that the Future Fund was mostly in cash and Telstra shares during a large part of the GFC. This complicates ten year comparisons with funds that had a full allocation to equities over the ten year period. There is also the matter of the Future Fund not being subject to any taxation.”

ASFA points out that super fund returns, in accumulation phase, are published on an after-tax basis.

“Looking forward, there may be very limited scope for the Future Fund to predict the start of the next major downturn of equity markets and to convert a large part of the equity holdings of the fund into cash, or the like.”

“On a five year return basis and adjusting for taxation, $1 invested into the Future Fund in June 2012 would have returned $1.67 at June 2017. Comparatively, the average super fund would have returned $1.64. Scores of super funds have also performed more strongly than the average.”

ASFA noted that, according to the Future Fund’s latest annual report, direct and indirect investment costs were around 160 basis points – higher than most super funds on a comparable basis.

“There is nothing necessarily wrong with higher investment costs. What is important, as the Future Fund knows, is performance in terms of increasing investment returns and reducing volatility. Superannuation funds are producing good returns on average for their members.”

This was one of the six superannuation myths from the recently released ASFA report, Mythbusters: Myths that super will come up short.

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