Super sector says ‘devil in detail’ on policy reform

Superannuation chiefs and industry heavyweights have thrown support behind the government's reform package, but have raised concerns about unintended consequences including trapping workers in under-performing funds.

The federal government introduced a raft of policies aimed to improve the superannuation sector, including pinning workers to funds, boosting transparency and improving performance by making it easier to compare funds.

Industry Super Australia chairman Greg Combet said more information was needed on super reforms. Credit:Rhett Wyman

Industry Super chairman Greg Combet welcomed the changes but said more information was needed.

"At a high level it's good. The government didn't seek to interfere in the super guarantee rise. It's good they didn't extend the early release scheme. They've taken further action on multiple accounts and it's good they're getting into performance and prepared to remove dud funds," Mr Combet said.

However, Mr Combet said "the devil is in the detail" when it came to developing a "fair and accurate" tool to compare funds.

"It should be based on net returns to members' accounts. That is, investment returns minus administration fees and costs.

"It shouldn't be based on fees alone. Illiquid investments like infrastructure have higher fees but also higher returns. Investment returns must also look into account administration costs. Ultimately what matters is what people get in their accounts."

Deanne Stewart, chief executive of $125 billion fund Aware Super, agreed a focus on investment fees could be misguided.

"It will drive a race to the bottom on passive fees but that doesn’t deliver the best outcomes for members," she said.

Ms Stewart called on the government to develop mechanisms to keep workers engaged with their super to ensure they are in the right fund, as younger workers are often signed up to super funds that are not appropriate as they age.

The government has also prioritised boosting "transparency and accountability" within the superannuation industry and while it is unclear what funds will be forced to disclosed, Rainmaker's head of research Alex Dunnin said portfolio holdings should be prioritised over union donations and marketing expenses.

"Funds should be totally accountable but let's try and fix the big problems first," he said. "You still can't look at what your super fund is invested in."

AMP's managing director of super Lara Bourguignon welcomed the focus on transparency and comparison tools.

"Together with returns and fees it's also critically important for Australians to understand the investment risk in super funds," she said.

AMP manages over $73.4 billion in superannuation spread across 70 products and 150 investment options, with some having previously been singled out in the Australian Prudential Regulation Authority's heat map project for under-performing funds.

The Assistant Minister for Superannuation Jane Hume told the ABC's Q and A program on Monday evening that her office had received strong demand for a third tranche of early release payments.

Ms Stewart said this would not benefit Australians facing financial difficulty and rather the budget missed the opportunity to support Australians on lower incomes through funding social welfare projects.

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