Key industry superannuation fund body, the Australian Institute of Superannuation Trustees (AIST), has heavily criticised retail superannuation funds for being insufficiently transparent with respect to fees and performance.
Utilising research it commissioned from SuperRatings, the AIST not only sought to point to the relative underperformance of retail master trusts, but claimed that the fees charged by retail funds were higher in the MySuper arena.
AIST senior policy adviser, Karen Volpato said the SuperRatings research should be a cause for concern that poor disclosure and data across the choice sector means members are unable to compare their fund’s performance.
The AIST-commissioned SuperRatings Fee and Performance Analysis 2017 examined more than 600 MySuper and choice investment options on a like-for-like basis, with Volpato saying it found that the vast majority of retail master trusts underperformed profit-to-member funds with similar asset allocations.
“But perhaps the most blatant examples of choice failing members is where the fees charged by the average choice retail fund for their balanced investment option is substantially higher than in the MySuper arena, especially on higher account balances, despite the fact the two funds have asset allocations within the same range,” AIST said.
Volpato claimed the poor track record of for-profit funds in the choice sector pointed to the need for improved data as well as consumer protection.
“In a compulsory super system where consumers are free to make a choice, there is an onus on regulators to ensure that investment options can be easily compared,” she said. “We need to collect better data and we need to ensure disclosure requirements are meaningful, honest and fair. As it stands now, choice is delivering sub-optimal outcomes for those who end up in for-profit retail funds.”
Volpato said current moves to improve disclosure did not go far enough, given that the choice sector had been granted many exemptions over a number of years from having to either disclose or provide reports to the regulators.
“The lack of comparable data – including arising from ASIC’s new RG97 disclosure requirements – means that consumers cannot be sure what they are getting into,” she said, noting that AIST had been a long-time advocate that net performance – what the member receives in their superannuation account – is critical.
“However AIST also recognises that how fees and costs are calculated and how they are disclosed is important since this impacts on net return,” Volpato said. “What matters most in terms of retirement outcomes are net returns but we also need to be able to properly compare fees and costs of all super funds, not just MySuper.”