The ending of grandfathered commission arrangements and fee for no service could see billions of dollars moving back into superannuation fund member accounts, according to a new analysis released by specialist research house, Dexx&r.
In an analysis made available to Money Management, Dexx&r chief executive, Mark Kachor suggested the impact of bringing an end to grandfathering could be far more significant than had been appreciated by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
He said that based on data pertaining to the last six months, the ending of grandfathering could result in a one-time payment of $1.75 billion to member accounts.
What is more, Kachor said the Dexx&r analysis was based on the reality of the six largest players in the field – AMP Limited, BT/Westpac, ANZ/OnePath, Commonwealth Bank/CFS, IOOF and MLC/NAB.
He said the analysis was undertaken by first identifying the size of funds under management (FUM) at June 2018 that related to FUM in-force as at June 2013, with each product with more than $800 million in FUM as at June 30 2013 held by each of the six largest administrators in these market segments (AMP, BT/Westpac, ANZ/OnePath, CBA/CFS, IOOF and MLC/NAB) being used in the analysis.
“Our analysis shows that there was a total of $189 billion in FUM held in pre-Future of Financial Advice (FOFA) Personal and Employer Super funds as at June 2018. This represents 57.5 per cent of total Personal and Employer Super FUM in force at June 2018,” he said.
Kachor said that Dexx&r had developed both a low and high estimate of the overall impact of the removal of grandfathered commissions with the low estimate based on an assumption of 15 per cent of June 30, 2018, FUM relating to pre-FOFA Personal Super and 40 per cent of employer Super and equated to $1.75 billion.
He said the higher estimate was based on 50 per cent of Personal Super and 40 per cent employer super and equated to a one-time pay-out to members of $3.7 billion.
Further, he said that under such a scenario, an additional $1.1 billion would flow to member accounts each year following the reduction in ongoing fee for no services charges and the removal of grandfathered commissions.