Funds run by big banks would miss out on best performer list
The Australian 12:00am January 12, 2019
Anthony Klan
EXCLUSIVE Not one superannuation fund run by the nation’s banks and major financial institutions would make it into a proposed “best in show” list of top 10 performers, data shows.
Industry funds took out each place in the list of 10 highest returning funds in the year to June, with that $653 billion not-for-profit sector similarly outperforming over three, five, 10 and 15 years, according to highly regarded analyst SuperRatings.
Of the 10 worst performers on a list of the nation’s biggest 50 balanced funds last financial year just two were industry funds — one of which was TWUSuper, the biggest super fund for the nation’s transport workers — while seven were funds operated by AMP, ANZ, CBA, Westpac and NAB.
The government this week released the Productivity Commission’s final report on its three-year investigation into the efficiency of the nation’s $2.8 trillion super sector, with its findings damning of for-profit funds, also known as retail funds, and of regulators.
The Productivity Commission has recommended a list of 10 “best in show” super funds be created, and that all new workers who do not choose a super fund to be signed up with one of those funds. Under the proposal an independent panel would name the top 10 best performers every four years.
The proposal has been attacked by the super industry — by both retail and industry funds — however the SuperRatings data disproves claims that a list would be meaningless because of high variations in fund performance year-to-year.
Regardless of the time frame, the best performers remained among the cohort of good performers while the worst performers remained near the bottom.
For example, the top three performers in the year to June, HOSTPLUS, AustSafe Super and AustralianSuper — all industry funds — were also ranked in the top four performers over five, seven and 15-year time frames.
The Productivity Commission has called for “architectural change” to the system, stating “evidence abounds of excessive and unwarranted fees”, with most affected members in retail funds.
It found that between 2005 and 2017, on average, retail funds delivered annual returns almost 40 per cent lower than industry funds.
The report found there were 5 million accounts in 29 “underperforming funds”, with a total value of $269 billion.
Of the 26 funds that performed above the benchmark — holding $405bn across 7.2 million member accounts — just two were retail funds and both were relatively small and performed only marginally better than the Productivity Commission’s benchmark.
The commission also found that one third of super accounts — about 10 million — were “unintended multiple accounts” costing the public about $2.6bn a year in excessive fees and duplicate insurance polices, and that high fees remained “entrenched” in the system, “mostly in retail funds”.
“Inadequate competition, governance and regulation have led to these outcomes,” the report says.
A spokesman for CBA, which owns Colonial First State, said the report showed “there is more work for us to do” and that the bank was “very focused on providing better outcomes for our customers”.
Westpac’s BT praised the PC report as “arguably the most in-depth and evidence-based assessment of the super system since its inception”, while ANZ declined to comment.