Government-run super fund a ‘dud’ idea

Industry Super Australia (ISA) thinks a proposed government-run super fund would be rife for pork-barrelling and will “dud” workers out of thousands of dollars.

Its modelling showed that a 30-year-old worker in such a government-run fund would pay exorbitant fees, earn lower investment returns and end up $126,000 worse off at retirement compared with being in a top-performing industry fund.

“This plan would funnel millions of Australian workers into an expensive and poor performing government-controlled super fund – all so politicians can get their hands on people’s money,” ISA chief executive, Bernie Dean, said.

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Earlier this year, Liberal senator Andrew Bragg reignited the national fund debate when he said the Government should “take its responsibilities more seriously” by making the Future Fund the default fund.

If the government-run fund was to go ahead, new workers would be entered into it by default unless they opted to join a different fund.

ISA said their modelling reinforced earlier evidence from the Productivity Commission (PC) that a government-run super fund would be prone to political interference and riddled with conflicts of interest.

“With almost unchecked power to spend workers’ savings, [the Government] could find it hard to resist ladling out money for pork barrels in marginal seats, all for the purpose of chasing votes rather than good investment returns,” ISA said.

According to ISA, political ideology could also trump the financial interest of members especially when a government makes itself the investment officer, trustee, owner, regulator and supervisor.  

The ISA supported the PC’s earlier research which found internationally government-run super funds invested conservatively as few governments could withstand the political risk of negative returns during market downturns, leading to less money at retirement and more pressure on the Aged Pension.

“And if the government-fund delivered lousy investment returns the taxpayer would be expected to bail it out – which combined with the higher pensions costs is a recipe for higher taxes,” ISA said.

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Just look at the pension funds in Europe to see how this works. It's like the old defined benefit schemes , you get a pension, your spouse gets 2/3, your kids or estate get nothing. Zero! Actuaries work out the death rates and initially the government of the day gets their hand on a pot of money, a few decades down the road the money runs out and more and more tax $ have to get poured in. Any discussion on reducing benefits leads to civil unrest. All this information can be readily found online. Australia is unique in having a Government basic income in retirement for everyone (back to most overseas schemes, if you've never pension, just basic welfare payments), plus the accumulated amount of the SG where unused portions get passed on upon death. ISA is spot on here, and I say this as a self employed FP.

If ISA is opposed, it must be a great idea.

Lets have the Future fund for the public. The Industry Fund reckon they are so good at managing money - the Government can let you manage a slice. Industry Super can continue to do so on a not for profit basis. Industry Super would likely be able to do it even cheaper as they would no longer need associations like ISA and or sponsorship of Football Teams and Qantas Points - so a win for members I reckon.

"...all so politicians can get their hands on people’s money,” ISA chief executive, Bernie Dean, said"
Obviously ISA is concerned as it and its union & labor buddies already have their greasy sticky fingers all over that money currently and don't want to lose their grasp on those rivers of gold.

what's the basis for saying it would be expensive? They also claim in other literature that the reason the Future Fund performance is better than their's is because they don't have the same cost base? Can't have it both ways but nothing surprises me from them.

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