Does the Government continue to play financial planner for those who do not take interest in their superannuation?
Does the Government continue to play financial planner
for those who do not take interest in their superannuation?
21 out of 77 MySuper products are regarded as “underperforming”, according to the Federal Treasury.
Treasury has told a Parliamentary Committee that those 21 funds held over $100 billion in assets across three million accounts and charged $1.2 billion fees.
What is MySuper?
MySuper is part of the Stronger Super reforms announced in September 2011 by the Gillard Labor government for the Australian superannuation industry to replace the previous default funds system with a new default system using low cost and simple superannuation products.
MySuper funds act as a default account for people who don’t choose their own super fund when they start a new job. They are designed to be:
Simple. You will be put into either a single diversified investment option or a lifecycle option, depending on the fund. Your fund’s features and investment returns are explained in plain English and easy to read graphs on a ‘dashboard’ that is readily available online or in print form with your annual statement.
Low cost. A bit like a basic home loan, you don’t pay for features that Government has decided you don’t need. There are restrictions on the type of fees you can be charged, and fees are restricted to the cost of providing a service.
Easy to compare. MySuper fund dashboards follow a standard format so they can be easily compared. Be mindful, though, that single option funds should not be compared directly with lifecycle MySuper products.
Retail, industry and corporate funds can all offer MySuper accounts to members in accumulation phase
Treasury Assessment
Treasury’s harsh assessment has been revealed in an answer to a question on notice to the Senate Economics Legislation Committee review of the Government’s Your Future, Super legislation with the department’s answer implying that many fund members were being kept in the dark about the relative under-performance of their funds.
"Under the current system, the members holding those accounts receive no notification that they are in an underperforming fund, and there is no trusted source of information for them to make their own informed judgements,” the Treasury answer said.
“There is also no prohibition today on a persistently underperforming fund receiving contributions from new members. Under the Your Future, Your Super reforms a fund that fails an objective performance based test in any one year will need to inform their members of that underperformance and be listed as underperforming on the YourSuper comparison tool until their performance improves,” the Treasury answer said.
“Funds that continue to underperform and fail two consecutive annual underperformance tests, will not be permitted to accept new members. These funds will not be able to re-open to new members until their performance improves. Every year that a fund underperforms they will need to continue notifying their members.”
Treasury’s rationale:
“More members making informed decisions about their superannuation and increased engagement via the YourSuper comparison tool will provide an additional benefit of $3.3 billion over 10 years. By improving underperformance, superannuation balances will be $10.7 billion better off over 10 years. Less waste of members’ money through greater transparency and accountability will boost members’ savings by around $1.1 billion over 10 years.”
Newcastle & Lake Macquarie Financial Planning Advisers Assessment
In summary, the Government have legislated these “cheap, simple super funds.”
Now the Government is complaining they are not working and underperforming?
I am confused…. Like most Australians, who are sick of the Government jumping in and playing political football with the superannuation system.
Firstly, the Government complained that super funds charge too high of fees.
Now they are saying, you are charging less fees but the performance has dipped and you are now “underperforming”.
Does the Government continue to play financial planner for people who do not take an interest in their retirement & superannuation savings?
We believe you should allow market forces to take affect.
Some will argue that many Australians:
are not financially literate - we agree. Maybe the Government could spend more time any money supporting Australians with their financial literacy. Could we include financial literacy in the high school curriculum. That way all Australians will have the knowledge and expertise to make an informed decision about their superannuation.
Great to see a start made on this - but the implementation and participation is where we are being let down.
https://www.taxsuperandyou.gov.au/
cannot afford financial advice - we agree. This is another area the Government has stepped in, making financial advice unattainable for many Australians. The Government could spend money to change this, which would provide more Australians with access to personalised advice tailored to their specific situation, which would allow Australians to make an informed decision about their superannuation. As opposed to the Government legislating change and becoming the financial planner for all Australians who do not engage with their superannuation fund.
Why Is Superannuation Important
With over 3 trillion dollars in superannuation & with the government taxing Australians over 14.8 billion dollars each year from their superannuation funds, it is important that the Government gets this right.
Not just for Australians today, but also for the future, with the Age Pension set to diminish over the next two decades, superannuation will become more critical for all Australians to secure their financial future in retirement.
What Can You Do?
Don’t leave your financial future in the hands of the Government.
Take control of your financial future and understand…
understand the superannuation system
understand the 15% tax rate, rather than your marginal tax rate
understand how successful people are living a comfortable retirement tax free
understand what you are invested in and the associated risks
understand how you can hold insurance to support your family within super
understand how your adult children can be taxed at up to 16.5% (if you have aging parents - this is critical to your inheritance)
understand that “cheap”, “low cost” superannuation funds are not always in your best interest.
If money or a comfortable retirement doesn’t raise your curiosity enough to learn about superannuation - outsource the research & education.
Employee a financial planner to support you so you can make an informed decision about your superannuation.