What an industry!
Hidden fees, charges for making contributions and the payment of ongoing commissions to long-forgotten sales people would become things of the past for most superannuation users under landmark reforms put forward by the government's Cooper Review.
Released two months before the review's final report the so-called MySuper reforms would require each fund manager to nominate a default fund out of which members could not be moved without their explicit consent.
Members of each default "MySuper" fund would much better protected that members who decided to leave, although the review has held open the possibility of extending to all funds some of its proposed protections.
Among the most important is a requriement that fund trustees minimise costs as well as work to achieve targeted returns...
An independent report commissioned from Deloitte finds that if the proposals were adopted, some fund members could expect to pay less than half what they are paying now.
More than 80 per cent of super users are at present in default funds. The review finds they are those most likely to "prefer to delegate the task offor designing and maintaining an investment strategy to someone else."
MySuper would both empower and require trustees to look after every aspect of the fund members' welfare, specifically preventing trustees from paying advisors of sales people so-called "trailing commissions" and charging for contributions, although trustees could charge exit fees based on actual costs.
Industry funds embraced the proposals.
"Universal super is one of Australia's greatest post-war achievements," said Industry Super Network chief David Whiteley. "Ticket clipping, kickbacks, commissions, percentage based fees and other incentives to financial planners to sell underperforming retail super funds have no place in universal super."
The Investment and Financial Services Association, representing for-profit funds, labeled the plan an attempt to "deny people control and choice".
"It will legislate for apathy and disengagement," said IFSA chief John Brogden. "At a time when research shows that there is a $700 billion retirement savings gap, the Cooper Review is recommending a solution that actively discourages people from engaging with their superannuation."
The review found that super was becoming more complex and more expensive "at a time when funds ought to be benefiting from economics of scale and increasing size."
Published in today's Age
IFSA Media Release
. Silly headline: "Six out of ten Australians support 12% super and will pay for it"
. Message to Australia's banking, real estate and super industries...
. Talk about less-than-honest rent-seeking
. The super-man is wrong: 9 per cent is plenty