The Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume has fired another shot over the bows of superannuation funds which have raised fees, suggesting the financial services regulators might care to scrutinise the funds.
Addressing a superannuation forum, Hume also questioned whether some funds were increasing fees because they had run down their administration reserves to historical lows.
“If a fund that has run down their administration reserves to historical lows over recent years then suddenly hikes fees to rebuild their buffers, I take a rather sceptical view of claims that the fee increases are the result of Government initiatives aimed at protecting small super accounts,” Hume said. “And I suspect the public will too. These claims will face scrutiny from the media, from their members, maybe from the regulators, and certainly from this government.”
The assistant minister said that many funds that received a substantial proportion of default super contribution had increased their administration fees in recent years irrespective of whether they were industry, retail or corporate funds.
“If some funds, especially the smaller ones, are increasing their fees because they are not of a size to spread the overheads required to invest in modern systems and deal with current compliance obligations, it truly speaks to everything I’ve said recently about the need to consider merging. Increasing fees and relying on employee inertia is a lazy solution and not in the best interests of members,” she said.
“But when it comes to some of the larger funds, we may need to dig a little deeper to find out the reasons behind fee increases.”
Comments
'Financial services regulators might care to scrutinise the funds'. Time for the Liberal government to start taking responsibility for the fee increases and its band-aid approach to over regulation. Stop pointing the finger at every one else when you are responsible for the fee increase. You hand out $100m of tax payers funds for sport funding for your own re-election with no care to process and then tell us we need over regulation and oversight to build Trust. The PM and Treasurer no doubt had their hands in this murky underhanded abuse of taxpayer's money to get re-elected. Time for a Royal Commission into the government miss use of the funds contributed by Australians.
Suncorp Brighter super has gone the other way by increasing the insurance and income protection in their plans by 200% with 30 days notice to all members to start 1st February ,, how in the hell can they do that, people are cancelling their insurances faster than we can email Suncorp.
This is what happens when the competition has been eliminated.
On 22nd Nov, 2019, Money Management's article titled " Where two big industry funds spent their money" detailed
that the 2019 AustralianSuper Qantas Frequent Flyer campaign cost $732,050 to develop and implement and a further $624,356 in broadcasting costs.
This effectively equated to a cost of $98 for each new member.
In addition, AustralianSuper spent over $11Mill in the 5 years to 2016 and nearly $19Mill to 2019.
Finally this article reported that AustralianSuper had contributed the the ISA marketing campaign at $3.5Mill in 2016 rising to $5.1Mill in the 2019 financial year.
So, ex- AustralianSuper Senior Strategic Policy Adviser in 2015-16 , Minister Jane Hume, needs to clearly define how the grotesque spending of super funds on advertising and marketing campaigns without member's authority to do so can be justified and how this satisfies the Sole Purpose Test .
The provision of 20,000 Qantas Frequent Flyer points to 13,801 new members (not existing members) is clearly an incentivised program to attract new members.
The purpose of joining a super fund is for the accumulation of retirement monies and not to obtain enough points for a short holiday or flight prior to retirement.
If someone buys a car or a fridge and they receive Frequent Flyer Points because the retailer has a deal with Qantas to encourage sales of goods then fine, because they are not required to meet the Sole Purpose Test.
Maybe a form of the Sole Purpose Test should be applied to distribution of public monies to sporting clubs who have recently been the victims of government misusing these monies in order to bolster political gain?
Whilst the Government via FASEA and ASIC are running around obsessed and fixated on whether an adviser can justify the balance of client work done for the fees charged to the last dollar, they appear to be able to blow tens of millions of dollars of public money in an unethical process driven by self interest and not best interest.
The balance of focus on the minutiae of financial advisers compliance is so unbalanced compared to really what else goes on at such a high level, it is unacceptable.
I haven't heard one comment from Minister Hume regarding questions raised in the House of Representatives Standing Committee on Economics relating to the AustralianSuper's multi million dollar spend on advertising.
Extremely well said!!! Well done. Why these aspects aren't raised in parliament with ASIC and APRA both brought into question specifically on these issues indicates some form of corruption or ignorance in the major political parties,esp Labor who has the most to gain/retain in this arena
Looks like the gravy train from multiple small balance super account admin fees and the insurance commissions from duplicate accounts is starting to hurt some Industry Funds.
On 30th March, 2019, AustralianSuper increased their administration fee by 50%.
Their statement indicates the reason for the increase was because costs have increased.
But when AustralianSuper has been spending tens of millions of dollars on advertising and promotion over a number of years , is it any wonder that costs have increased and now the members have to pay for it ?
AustralianSuper claims " As a profit-for-member super fund, these additional administration fees will be directed towards providing better products and services for you, not paying profits to shareholders".
Is spending multi millions of dollars on advertising and promotion a direct member benefit and/or service ??
AustralianSuper will argue that the more members they have, the cheaper the cost per member to deliver services, but they have just increased their administration fee by 50% following a concentrated advertising and promotion campaign and in the case of the new members secured through the Qantas Frequent Flyer promotion of 13,801, each one of these new members had to contribute a minimum of $350 to the fund.
This equates to at least $4,830,350 in new QFF generated member contributions.
Minister Hume....are you listening ??
Australian Super have recently introduced a new levy to circumvent the 3% fee cap on small accounts aswell! Interesting how she specifically says " especially small funds...." with regards to an automatic assumption for the need to merge and yet the larger funds such as Australian Super are let off with a "we'll have to look at it." The biases are clear.
Another reason for the admin fee increases is that a lot of default super funds are now required by ASIC to report the Intra-Fund advice fees collectively charged to all members. ASIC requires this this fee (and all bonuses paid) to be disclosed in the fund adviser FSGs. These bonuses can be as high as $40,000 pa. These funds are no longer able to hide these costs as general line items, as has been the case since 2014. IF Minister Hume was serious was reducing costs, she would insist that only product information or true transaction admin services be provided through intra-fund fees, and that advisers should not be permitted to be funded through admin fees to provide personal advice (as requested by the FPA previously). This is because an admin advice fee is being charged for advice that most members never receive, and it is an advice fee they are unable to opt out of.
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