Industry funds would still top list under Productivity Commission models

Industry super funds are likely to still be favoured under alternative models for selecting default super funds, due to their performance.

The Productivity Commission recently released its draft report into alternative models for selecting default super funds. The report has been criticised by Industry Super Australia and other superannuation industry bodies as opening up the default super fund process to retail – bank-owned – super funds.

However an analysis by SuperRatings finds that industry super funds are still likely to be favoured by the alternative models suggested by the Productivity Commission.

“SuperRatings notes that the over-arching criteria for assessment and inclusion as a default fund proposed by the Productivity Commission is a focus on net-returns, which SuperRatings has been advocating for many years, via its net benefit modelling. This measures a fund’s net returns after the deduction of all fees and taxes over a 10-year period,” said SuperRatings.

SuperRatings identified 10 funds most likely to be included in a ‘List of 10’ default funds. The funds, in alphabetical order, are:

  • AustralianSuper
  • BUSSQ
  • CareSuper
  • Catholic Super
  • Cbus
  • HOSTPLUS
  • QSuper
  • Rest Industry Super
  • Telstra Super
  • UniSuper

“Based upon SuperRatings net benefit modelling, the above funds have the highest net investment returns over a 10-year period and hence, would be included based on a pure net investment performance measure.”

“As can be seen from the above table, each of the top performing funds on a net return basis is a Not-for-Profit fund, suggesting that the Retail Fund sector may continue to struggle to be named as defaults, unless a broader assessment of measures is utilised.”

However SuperRatings CEO, Adam Gee, said that limiting the list of default funds to 10 would “result in some outstanding value for money funds missing out on default fund status, which may sound the death knell for many of these, despite delivering excellent outcomes for their members”.

Additionally, the exclusion of insurance from the assessment is ” fraught with danger”, Mr Gee said.

Instead SuperRatings calls for a “broad assessment of quality”.

“This must include an assessment of a range of underlying metrics in respect of investments, fees, insurance, member servicing/advice, administration and governance, to ensure that every facet of a superannuation fund’s offering can be appropriately interrogated.”

Note that SuperRatings says: “Past performance is not a reliable indicator of future performance.”

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One Reply to “Industry funds would still top list under Productivity Commission models”

  1. Some of the funds listed are not open to the public so how could they be default funds?

    I can’t see the retail funds just lying down on this issue, I am sure there would be intense lobbying on the selection criteria with a view to getting some retail funds into the list.

    A list of 10 funds is ridiculously limiting and, as the article suggests, would probably lead to a future wave of mergers resulting in a significant loss of competition and innovation – short sighted!

    Bob

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