‘Smart defaults’ for super could boost retirement savings by 35%

‘Smart defaults’ for super funds could boost annual super fund returns by 3.5%-4.5% per year, increasing balances at retirement by 35%.

The Financial Services Council (FSC) says that new technology allows for individually tailored superannuation products, but the default MySuper system is not taking advantage of these opportunities.

“Millions of Australians in MySuper are missing out on up to a third of their retirement balance because of the inertia created by a lack of genuine competitive forces targeting better retirement outcomes,” said the FSC. Read more...

$94 billion trapped in subscale super funds due to industrial awards: FSC

Up to $94 billion of superannuation savings is “trapped” in small, subscale and underperforming superannuation funds due to the industrial awards system.

The figure comes from the Financial Services Council (FSC), which says Fair Work Commission’s default super fund selection process is leaving up to 1.7 million people worse off in retirement.

Analysis by the FSC found there are 33 super funds listed under modern awards which each manage less than $10 billion. The average performance of the 33 funds over 10 years was “just” 4.50% per annum, which was 0.80% lower than the average of all ‘growth’ super fund options. Read more...

Increased default fund competition could save $292 million a year in fees

Increasing competition between super funds could save $292 million a year in fees, says the Financial Services Council.

The FSC has released research, by Deloitte Access Economics, which indicates increasing competition among MySuper super funds could reduce total administration fees by 13%, or $292 million a year.

FSC CEO Sally Loane said: “The evidence is clear. If competition reforms are introduced to allow all funds to compete in an open and transparent market, fees in superannuation will fall dramatically.” Read more...

Vast majority want default super funds to return profits to members

The vast majority of Australians, 91%, believe that default superannuation funds should return all profits to members. This is the finding of a poll by Essential Media, conducted for the Australian Institute of Superannuation Trustees (AIST).

AIST CEO Eva Scheerlinck said the poll showed that the public wants a default superannuation system that values members, not shareholders.

“First and foremost, our default super fund system must ensure that members’ interests are protected,” said Ms Scheerlinck. Read more...

Productivity Commission proposes four ways to revamp default super funds

It would be possible for a person to have a single default super fund in their lifetime, instead of having multiple default funds as they change employers, under models developed by the Productivity Commission.

The Productivity Commission was tasked by the government with developing alternative models for setting default super funds. The Commission has now released its draft report, containing four default super fund models.

“After 25 years, and notwithstanding a history of reasonable returns as a general rule, structural faults are evident in default superannuation,” said Productivity Commission Chair, Peter Harris. Read more...

New anti-bank super campaign launched by Industry Super Australia

Industry Super Australia has launched a new attack campaign on the banks and their “attempts to dismantle the model used by the most successful part of the superannuation system, and put at risk the retirement savings of millions of Australians”.

The campaign, called ‘Banks aren’t super’, includes a TV ad depicting federal politicians opening the superannuation hen house for the waiting, ‘bank’, foxes.

“The commercial responds to bank attempts to secure unfettered access to Australia’s default superannuation system for those who don’t choose their own super fund,” said Industry Super Australia. Read more...

Increased bank market share of superannuation could harm returns

Industry Super Australia says super fund members could see a fall in investment returns if the dominance of the big four banks in banking is replicated in the superannuation sector.

ISA draws a connection between the banking market share of the major banks, which has grown from 66% in 1990 to 80% in 2016, according to an analysis of APRA data, and their plans for superannuation.

“The finding comes as bank lobbying to secure greater access to the super sector, under a ‘choice and competition’ catch-cry, intensifies,” said ISA. Read more...

Tender process for default super “solution looking for a problem”: ASFA

The Association of Superannuation Funds of Australia (ASFA) says a Chilean-style tender process for selecting default superannuation funds is a solution looking for a problem.

ASFA has released a research paper on the Chilean tender process for pension funds, at a time when the Productivity Commission is considering such a model as one of the alternatives for allocating members to default super funds.

ASFA says the research “shows the adoption of a Chilean-style tender process for default super in Australia would be a solution looking for a problem that doesn’t exist and have adverse effects on member outcomes”. Read more...

Banks getting more efficient with benefits to business switching default super funds

Banks continue to offer benefits to businesses to encourage them to switch default superannuation funds for their employees and it appears to be producing results, according to research released by Industry Super Australia.

“The results clearly show that the banks continue to be active in recommending default funds to SMEs, and that they continue to offer SMEs benefits for switching their default funds,” says the report prepared by UMR strategic research.

This latest research follows from a 2014 survey, also conducted by UMR, which showed that 26% of employers surveyed said a bank had approached them about switching default super funds, and of these 43% had been offered a benefit for switching. Read more...

ASIC warns about issues with employers choosing default super funds

ASIC has warned about the issues with employers choosing default super funds for employees, including around incentives and the offering of inducements.

“Although employers currently have the legal responsibility to make a decision in relation to the default superannuation product, employers are required to neither select a fund that is in the best interests of their employees nor to put their employees’ interests ahead of their own in selecting the fund,” said ASIC in it’s submission to the Productivity Commission. The Commission is conducting an inquiry to determine alternative models for setting default super funds. Read more...