ISN research fundamentally flawed, says Brogden

The Financial Services Council (FSC) has questioned the underlying basis of research used by the Industry Super Network (ISN) which suggests people would be better off putting their money in the bank than in a retail superannuation fund.

FSC chief executive John Brogden said the ISN research was misleading because the Australian Prudential Regulation Authority (APRA) data used as its foundation was collected for prudential purposes and was not designed for consumers.

The ISN research was undertaken by its chief economist, Dr Sacha Vidler, and utilised the APRA data to claim retail super funds do not typically pass on the benefits of scale to their members and pay above-market rates for in-house services.

However Brogden said the use of the APRA data was misleading.

"The data reflects funds as a whole rather than the individual investment option - balanced, growth, defensive - that a person is invested in," he said. 

Brogden also slammed the ISN for "deliberate misrepresentation" of the APRA figures which he said ensured only one result - reduced confidence in superannuation for all Australians.

He said the APRA data combined the performance of all investment options within a super fund and provided an aggregate performance return of the fund before taking the average return of each fund and aggregating it at sector level to produce a rate of return for each sector.

A further significant factor that distorted fund level performance was that the age of fund members had a significant impact on asset allocation, Brogden said.

"These fundamental differences are not reflected in the APRA data," he said. "APRA has said the data was not designed to provide individual members with information to compare the investment options offered and has been working to produce information that is relevant to consumers."