The federal government might be considering turning the nation’s sovereign wealth fund into a public-offer super fund to overcome the problems highlighted by the Productivity Commission report, but new figures suggest retirees would be more than $100,000 worse off under the proposed model.

The changes would allow the Future Fund to offer low-cost super accounts to improve the competition and efficiency of the super industry after the Productivity Commission released its scathing review of the system in January.

While details on the plan are scarce, new research conducted by Industry Super Australia (ISA) has found Australians using the Future Fund would retire with tens of thousands of dollars less than they might have earned with an existing fund.

The study – undertaken by former Treasury retirement modelling official Phil Gallagher (now ISA’s special retirement policy adviser) – found workers earning $80,000 a year would save 13.6 per cent more with their money invested in average top-quartile industry fund pension options than in the Future Fund.

In actual monetary figures, that would mean $124,850 less for individuals and $194,100 less for couples, and ISA chief executive Bernie Dean said that’s not a feasible solution.

“If you look at all the evidence before the royal commission and the Productivity Commission, you’re left with the sad conclusion that the only people promoting the Future Fund as an idea are those blinded by ideology and not interested in the best outcomes for consumers,” Mr Dean said.

“The job that the Future Fund has at the moment is very different from the job a super fund has for members. They’re two very different types of funds. Our view is that the Future Fund is not, in its current state or on public offer, a viable option for people to save for retirement.”

The Financial Services Council (FSC), the lobby group representing retail and bank-owned super funds, also expressed concern at the idea of a government-run super fund.

“The FSC is concerned that creating a new superannuation monopoly would run counter to years of economic reform where government-run monopolies were removed and replaced by competition,” FSC chief executive Sally Loane said.

“Instead of replacing the current default super system with a monopoly default fund, the FSC considers it is better to ‘lift the bar’ on all MySuper products.”

Mr Dean similarly said the government would be better placed to connect members with better-performing funds rather than “finding new ways for them to end up with less in their accounts”.

Members on the move

As the effectiveness of the rumoured proposal continues to be debated, Mr Dean said super fund members were already weighing up their options and switching funds to better meet their needs.

“While all of this debate is happening inside the Canberra political bubble, people are applying their own test – the hip pocket test – and they are migrating from underperforming funds to good funds in unprecedented numbers,” he said.

Last year industry funds saw their inflows climb $6 billion in the wake of the banking royal commission, with Australian Super – the country’s largest super fund – seeing its inflows jump 49 per cent on the previous year.

The New Daily is owned by Industry Super Holdings