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PC report proposals tipped to benefit industry funds most
The Productivity Commission’s proposal to base default options for workers on the top 10 performing super funds will benefit industry funds more than retail funds based on performance and satisfaction, according to Roy Morgan Research.
In its final report on superannuation, the Productivity Commission recommended using the 10 best-performing retail and industry funds as the default options for new workers.
Based on the performance tables and satisfaction ratings of industry super funds versus retail super funds, Roy Morgan Research said it expects that this proposal by the Productivity Commission will benefit industry funds over retail funds.
The results from the latest Roy Morgan Single Source Survey conducted in the six months to November 2018 indicated that eight of the top 10 performing funds based on satisfaction with financial performance were industry funds.
The highest satisfaction was for Catholic Super at 70.5 per cent, followed by UniSuper at 69.7 per cent.
The only retail funds to make it into the top 10 were ASGARD with a satisfaction rating of 65.1 per cent and Macquarie with 63.7 per cent satisfaction, but both were below the average of 65.5 per cent for the top 10.
The survey results also showed that the five major retail superannuation funds have an average satisfaction of 54.7 per cent, compared to the total retail fund average of 57.2 per cent and well below the industry fund average of 61.8 per cent.
“The best performer among the majors was Colonial First State with 60.7 per cent, well ahead of second placed BT at 55.6 per cent,” Roy Morgan said.
“The lowest satisfaction among these majors was for AMP with 50.4 per cent, and it was in fact the lowest of all the funds reported on in the superannuation satisfaction report.”
In the six months to November 2018, the average satisfaction for industry funds was 61.8 per cent, an increase of 2.6 per cent points from the same period 12 months ago at 59.2 per cent. Over the same period, retail funds declined by 0.3 of a percentage point from 57.5 per cent in 2017 to 57.2 per cent in 2018.
Roy Morgan industry commentator Norman Morris said that the proposal by the Productivity Commission to produce a list of the top-performing superannuation funds in order to improve on the current default system faces a number of issues.
“An important consideration in determining which funds will be included in the top 10 is that with market fluctuations they are subject to regular changes or re-ranking,” Mr Morris noted.
“This means that consumers may choose the top fund one day, only to have it slide down the ranking. We have seen this happen with our satisfaction ratings, where only three funds out of the top 10 have remained in this group for the last three years.”
As superannuation is a very long-term process, Mr Morris said that it is likely that over a number of decades there will be a large number of ranking changes.
“This is likely to cause uncertainty and confusion in member choice in an industry that already lacks member engagement. It is more likely that members want a simplified system rather than one subject to continuous change and decision making,” he said.
Industry funds are hiring staff to manage Money in house from the exact external fund managers they just sacked and redeemed the money from because of poor performance:Who is going to pull the money from industry funds when they have poor performance:They are not accountable and will not be compared to external manages as they gradually pull mandates and close them down.:Never been more worried about having my money in an industry fund.They’re hiring policies and accountability seriously in question:Who is going to pull money from them when they underperform.:Have a look at all the hires recently at all the industry funds. Uni Super ,C_Bus,Rest,Aust Super:They have all come from fund managers that have shut down because of poor performance and they are now managing my money- Get me out :0- It can not just be an outstanding year for Industry Superfunds alone. If 8 out of 10 superfund outperform retail funds this year it does definitely indicate something, they all operate in the same markets! Not saying that every Industry Fund is a good fund, but we have seen for years that Industry Funds have lower fees and give better returns on peoples superannuation funds. There is no way you can twist this around! Retail funds are kicking and screaming as they are finally held to account for years of greed and bad service!0
- Look at the asset allocation. Risk vs Return. I dont believe most unadvised members of super funds actually understand either concept. Advice required yet not easily obtained from super funds without extreme bias. Fees clearly make a difference yet all "balanced" or "default" funds are different. Look at valuation methodology. Look at life insurance premiums and profit share (largely undisclosed) that enables fees to be kept lower. Sorry, they are not the starlets of our superannuation system. Many retail funds are worse, I grant you.... but not all. However to put employees money only where there has been good performance with no regard for anything else? just not right. Oh, whilst we are at it, how does tickets to the footy for industry fund execs and family plus sponsorship of a footy club constitute a benefit for members? how is that allowed in our system let alone for a non-profit organisation. Still reckon more thought is required.0
- as I recall, selecting best performer from last year seldom means they are the best next year .. also, how funds actually report and manage money differs. Again, as I recall, certain industry fund did not revalue property assets for years which resulted in above average performance compared with the rest. Hardly ethical and hardly a fair and honest way to report things. THen there is the difference between asset allocations across funds that might all be labelled "balanced" ... asset allocation can make up around 90% of returns with the balance being skill/luck. So, how does a superannuation member decide? How does anyone decide? And if no real checks or balances around what can be a default fund asset allocation, a level playing field is not present. I think this idea is short sighted and foolish. The PC has erred in making this a reasonable direction in my opinion.
Satisfaction of a fund - depending upon how one asks the questions, the results will differ. If it is purely on performance, then how the individual members funds are invested will provide fodder for good or bad satisfaction. In my experience, naive investors want double digit returns in all markets with cash-like security and hence low risk. Unrealistic. ALso, they dont want to see a negative return ever! LIkewise, if a mature aged person has insurance in super, then the cost of that can wipe out returns or turn them heavily negative in a poor environment, which skews satisfaction somewhat.
More thought required - maybe from those who are at the coal face rather than ivory towers. Perhaps PC is the right acronym for them... theoretical warriors with little practical application in forwarding life.0 - Absolute airy fairy decision
What is best? All members of funds should seek advise - not some arbitry umpire0
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