Industry Super Australian has accused retail and ‘bank-owned’ super funds of “gouging” up to $1.8 billion from superannuation fund members by slowing the transition to MySuper products.
Industry Super Australia says retail super funds will collect between $800 million and $1.8 billion in additional fees from super fund members by leaving default super fund members in legacy default products until required to transition. Super funds have been allowed until July 2017 to transfer accounts in default investment options to MySuper products.
Research, conducted for Industry Super Australia by Rainmaker Information, estimates that “not-for-profit (NFP) fund default FUM has in effect fully transitioned across to MySuper compared to an adjusted 43% for retail”. Industry super funds “almost fully transitioned” to MySuper products in the first year, 2013/14, while the 43% figure is as at June 2016.
The report goes on to says that “the slow retail transition has most likely been a deliberate strategy by retail wealth managers”.
This slow transition also comes with a cost to super fund members.
“For individual members this MySuper transition delay can cause them to pay an extra $1090 in fees between 2014-17. Over a 20 year period this converts to a $20,227 impact on their potential retirement savings,” says the report.
Rainmaker estimates the delay will cost retail super fund members $800 million over the 2014-2017 financial years.
“This effect is reinforced if we consider that some retail MySuper products charge fees so low they are the cheapest public offer MySuper products available in the market.”
“Indeed Rainmaker estimates that were those ultra low-cost MySuper fees applied to all retail MySuper products the fee differential would more than double from $800 million to $1.8 billion.”
Industry Super CEO David Whiteley said: “There is a major question as to whether trustees are fulfilling their legal duties to put the interests of members over profits generated by wealth businesses inside the banks.”
“The retail and bank-owned super fund practice of leaving members’ accounts languishing in more expensive legacy products requires greater scrutiny,” he said.