Industry Super Australia (ISA) welcomes new research published by the McKell Institute that shows the age at which you retire age could boil down to the type of super fund you are a member of.
The research uses historical differences in crediting rates from 1987-2013 to conclude that starting from the same point, an Australian could have to contribute to their super for a further eight years had they been a member of an average retail super fund. That is, funds that are typically owned by the banks, which have historically underperformed compared to other not-for-profit funds over the medium and long term.
ISA Chief Executive David Whiteley said that this alarming finding reinforces the need for a default super safety net to ensure that only the best performing super funds are default funds.
“With eight in ten Australians not choosing their own super fund there needs to be a default super safety net that ensures only the very best performing funds over the long term can be default funds.
“Bank-owned super funds are seeking to abolish the safety net and intend to cross-sell their super funds by leveraging existing business banking relationships.”
This problem is compounded because of the recent bank-friendly changes to financial advice laws to allow banks and other retail funds to pay sales incentives to staff selling super products and to allow commissions paid on super products to automatically continue when a member is transferred into a pension product with the same provider.
“As ISA has consistently argued, concentration in banking and vertically integrated financial advice businesses means there are significant risks in the default fund selection process.
“In the long run, the only logical solution is to prohibit banks or related entities from providing default super fund services to employees where the bank is the main banking provider to the employer,” Mr Whiteley said.
The McKell Institute report can be found in full here.
*Past performance is not a reliable indicator of future performance and it should never be the sole factor when selecting a fund.
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