Yahoo Finance Plan to save Aussies $533K in super slammed by industry
A plan to direct new workforce entrants into one of 10 “best in show” super funds to end account proliferation and encourage competition has been panned as having “parted company with the evidence”.
The Productivity Commission, which made the recommendation, said the change could deliver up to $533,000 in extra savings by retirement to someone starting work today, along with other reforms to reign in excessive fees and boost fund performance.
The 700-page report was released earlier this month and has elicited some strong reactions from the $2.6 trillion sector, with many industry participants arguing the controversial “best in show” list will do the opposite of its aim.
“The final report focuses on replacing rather than improving a system that is already world-leading,” argued major financial consultant Rice Warner this morning.
“The main suggestion of a 10-fund Best in Show structure for new default members will lead to an oligopoly in time, reducing competition and increasing systemic risk.”
In an extended response, Rice Warner accepted that the analysis performed was strong but said the recommendations didn’t align with the results of the analysis.
AMP’s chairman David Murray also hit out at the recommendation, warning it would distort funds’ investment decisions.
He suggested funds would prioritise different asset classes to provide the appearance of more reliable outcomes.
Speaking to Yahoo Finance, Raiz Invest Super CEO George Lucas said the 10 funds will have the “stamp of approval from the government” so it’s unlikely Australians would look elsewhere.
“This will stifle competition in the Australian market around competing managers. The 10 funds theory is based on a flawed logic that past performance is a predictor of future performance when in fact it is not a predictor even when you lengthen the time frame.”
He warned that the top 10 funds will grow to enjoy an oligopoly.
“In a generation’s time we are a likely to see something similar to what’s happening now,” Lucas said.
“However, by then it will be a royal commission into the abuse of power by these proposed 10 selected super funds.”
Make your money work with Yahoo Finance’s daily newsletter. Sign up here and stay on top of the latest money, news and tech news.
Now read: Busted: The superannuation myth we all believe has just been debunked
Now read: Why these super funds are outperforming the rest
Now read: Why the man who launched Flatmates.com.au has turned his eye to super
