Currently, new employees are offered an industry-specific fund by default when they commence work. “An important consideration in determining which funds will be included in the top ten, is that with market fluctuations they are subject to regular changes or re-ranking. A new way of allocating default members to products should make default the exemplar. Not only do industry funds have higher satisfaction, they are also increasing the gap with retail funds – in the 12 months to November 2018 industry funds improved their satisfaction ratings by 2.6%, while retail funds fell 0.3%. Stage 1 developed a framework for assessing the efficiency and competitiveness of the superannuation system, which forms the basis for the assessment in stage 3. Risk isn’t something to be avoided altogether. The commission found it to be an industry with little sense of competition or accountability. These changes need to be implemented in parallel to other essential improvements. Karen Chester, the deputy chair of the Productivity Commission, argues that this process should see underperforming funds either improve, exit the system or merge with a better-performing ones that would provide better outcomes for its members. Association of Superannuation Funds of Australia (ASFA) chief executive Dr Martin Fahy said he was disappointed to see the ‘best-in-show’ proposal – originally put forward by Productivity Commission last year – was still on the table. Kate Howitt identifies the stocks she likes and the disappointments, gives context to the increasing role of retail investors, and explains why the market is more of a 'voting not weighing' machine than ever before. Excellent and please keep up the good work! There were other references to "unhealthy competition" in regards to sociological outcomes (eg teams and workplaces), I will admit but no-one since Adam Smith until the Australian Government invented the term has anyone considered any economic competition as "unhealthy". Dennis Atkins: As Queensland votes, Clive Palmer may have told one too many whoppers, ‘Gift of a lifetime’: Kanye gives Kim birthday hologram of her late father Robert Kardashian, Jeff Bezos’ pandemic windfall: Amazon posts record profits as online shopping boom continues, The latest super rankings: Fine-tune your account to cash in on the coming recovery, Zoe Daniel: ‘Forgotten’ voters backed Trump, now they’re deciding if he heard them, Bushfire royal commission findings ‘useless’ without government action on climate change, Unemployment will always exist. Stage 3 is an assessment of the efficiency and competitiveness of Australia's superannuation system using the framework developed in stage 1. ", Vishal Teckchandani, Content Editor, nabtrade: "Exceptional investment literature of the highest possible quality. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. It also recommends that funds report to Apra each year on how many of their MySuper members have switched to a higher-fee choice product within the same fund – to prevent those funds on the “best in show” list using it to “upsell” members into weaker-performing and higher-fee paying products. BT Financial Group chief executive, Brad Cooper, told delegates at the SMSF Association National Conference today that the list could become difficult to crack into, as “with the liquidity advantage that those funds then enjoy, you start to get improved performance just because of that”. The Productivity Commission acknowledges the Traditional Owners of Country throughout Australia and their continuing connection to land, waters and community. Many see their retirement balances eroded — often by over $50 000 — by duplicate or unsuitable (even ‘zombie’) policies. These erode members’ balances by $2.6 billion a year in unnecessary fees and insurance. And your retirement relies on it, Mon 28 May 2018 10.15 EDT The final report was handed to the Government on 21 December 2018 and publicly released on 10 January 2019. This certainly works in favour of industry funds, given the commission found that fees for such funds “on average remain well below the fees charged by retail funds”. ", Eleanor Dartnall, AFA Adviser of the Year, 2014: "Our clients love your newsletter. The top 10 digital trends in superannuation SS&C Technologies, Inc. | 1. “In essence the Productivity Commission is abandoning the proven, low-cost industrial default system in favour of a choice-first architecture that has been ground zero for consumer harm,” Mr Dean said. Regulatory uncertainty: the calm before the storm At present, there are few confirmed regulatory changes in the pipeline for superannuation funds, in sharp contrast to last year. I expect the panel will comprise the usual suspects: a few union bosses, a few company executives, some former politicians, Gonski and Peter Fitzsimons. ", Ian Silk, CEO, AustralianSuper: "It has become part of my required reading: quality thinking, and (mercifully) to the point. The writers are brilliant. Views from First Sentier Investors and BNP Paribas Asset Management. What's equally interesting is the stocks they bought. ", Australian Investors Association: "Australia's foremost independent financial newsletter for professionals and self-directed investors. A key recommendation of the Productivity Commission report into the super sector was for a top 10 ‘best in show’ list of super funds to be shown to new entrants to the workforce. Commissioners working on this inquiry are Peter Harris and Karen Chester. The default segment outperforms the system on average, but the way members are allocated to default products leaves some exposed to the costly risk of being defaulted into an underperforming fund (eroding over 36 per cent of their super balance by retirement). It also seeks to lower fees, given it found that they are higher “than those observed in many other OECD countries”. ", David Goldschmidt, Chartered Accountant: "I find this a really excellent newsletter. I have long been a critic of these products. ", Reader: "Love it, just keep doing what you are doing. But given industry super funds accounted for eight of the top 10 funds and 14 of the 18 top-performing default products, it should not be afraid of this report – it vindicates their performance. Helping clients avoid potentially disastrous mistakes is often underestimated. It is the right length too, any longer and it might become a bit overwhelming. Of the worst 10, five were retail funds, three were industry and two were corporate. The draft report was released on 29 May 2018. Productivity Commission Report endorsed many of the government’s superannuation reforms that are currently before the Parliament. However, one of the report’s key measures – the introduction of a list of the 10 best performing funds that the commission claims would boost retirement balances by an average of $165,000 over a lifetime – has been questioned by both the Opposition and senior industry figures. Get The New Daily free every morning and evening. Our unique assessment of the super system reveals mixed performance. In the context of receiving the terms of reference for the stage 3 inquiry into the Efficiency and Competitiveness of Australia's Superannuation System, the Treasurer has agreed that the stage 2 inquiry be incorporated into and finalised as part of the stage 3 inquiry. Over the last 20 years, smaller Australian listed companies have outperformed larger companies but with greater volatility. This insight by the PC will hopefully squash some aspects of the Cooper Review, whereby there was an inference that retirees should cash out from long-term investments to buy annuities. ", Reader: " Finding a truly independent and interesting read has been magical for me. Cuffelinks is STILL the one and only weekly newsletter I regularly read. The Australian Government asked the Productivity Commission to undertake a 12 month inquiry into the competitiveness and efficiency of Australia's superannuation system. Have the rules of retirement investing changed? The top 10 digital trends in superannuation: the time for talk is over For quite a few years now, the superannuation sector has been awash with talk of change. Every year, the call grows louder – underpinned ... the Productivity Commission report and the Australian Taxation Office’s MIG3 will undoubtedly usher in significant The commission found that of the 20 underperforming funds, nine were retail (more than half of retail funds), six were industry, three were corporate and two were for public service. Reported fees have trended down on average, driven mainly by administration costs in retail funds falling from a high base. Well done! Roy Morgan finds that, based on consumer satisfaction with financial performance, eight of the top ten funds would be industry funds. Required fields are marked *. The theory is that they buy after markets rise as confidence grows, then sell in panic when markets fall, and miss the recovery. Among the recommendations to reform the estimated $2.8-trillion superannuation sector are: The Productivity Commission report foreshadows the likely recommendations to be handed down by financial services royal commissioner Kenneth Hayne, in his final report to the government this month. Financial advice has moved well beyond simply recommending investments, with five major components to quality advice. The PC report also said there should not be a MyRetirement default and hopefully this leads to healthy debate in this area.

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