Former competition czar Allan Fels says fees attached to self-managed super funds “are not properly disclosed” and a significant number are “performing poorly”.
“Something needs be done about it, but I’m not sure what,” Professor Fels told the conference of major superannuation funds on the Gold Coast on Wednesday.
SMSF members often paid “hidden fees” on investments through commercial platforms that were difficult for the uninitiated to understand, he said. This resulted in returns below industry averages.
Eva Scheerlinck, CEO of conference sponsor the Australian Institute of Superannuation Trustees, said SMSF’s seemed to “operate in their own bubble” and their returns were not “compared to industry funds”.
Ian Silk, CEO of $140 billion AustralianSuper, the country’s largest super fund, also called for reform of the SMSF sector.
He said industry funds would like “a revamped and smaller SMSF sector following a full inquiry into the performance of the sector, and a new tighter regulatory regime”.
The Australian Taxation Office recently revealed that the top 100 SMSFs control assets worth $7.9 billion – an average of $7.9 million each.
It also said six SMSFs each held more than $100 million, and that 5600 SMSF members had balances of more than $5 million.
That compared to only 420 pooled super fund [industry and retail] members with more than $5 million.
Mr Silk also said super funds needed to be more actively engaged with the companies they invest in to ensure members’ and society’s interests were met.
“Super funds should have well-articulated asset ownership frameworks that guide their interaction with companies in which they invest,” he said.
With their large cash flows, industry funds are becoming more important stewards of capital than ever before.
“Notwithstanding some of the hysterical commentary … industry funds have proven themselves to be responsible owners, and committed to delivering strong investment performance for their members.”
Mr Silk said the retirement income system must address “the unacceptable situation that women currently retire with 40 per cent less superannuation than men; and that many other groups don’t get their fair share of benefits from that system”.
“The system is meant to be universal and needs to distribute those benefits more fairly,” he said.
Ms Scheerlinck noted that industry funds had come through the banking royal commission without allegations of significant misbehaviour.
“The commissioner did not refer any of the profit-to-member super funds subject to investigation to the regulators for further action,” she said.
“Rather, it is the retail super funds, along with the major banks and other for-profit entities – 14 entities in total – that face further investigation and possible prosecution for the practices and behaviours that Commissioner Hayne found may have fallen short of the law,” she said.
The New Daily is owned by Industry Super Holdings