The value of Australia’s superannuation system could have been improved by as much as $10 billion a year if bank-owned retail funds had performed as well as industry and public sector funds, according to new Industry Super Australia (ISA) research presented to the Productivity Commission (PC).
The research, undertaken for ISA by former Australian Prudential Regulation Authority (APRA) manager, Dr Wilson Sy has been presented to the PC as providing empirical proof that retail superannuation funds are acting as a drag on the broader industry.
In a covering explanation, ISA director of policy, Zachary May also pointed to other findings contained in Dr Sy’s research involving a case study of the Commonwealth Bank’s Wealth Management arm.
“This study suggests that in addition to direct costs to CBA superannuation members such as declared investment fees, indirect costs (such as stockbroking commissions, margin lending and financial advice) are a significant source of profit for the corporation,” May said.
In the executive summary to his report, Sy claimed the inefficiency of the superannuation system could be attributed significantly to the consistent and persistent under-performance by an average of 2.1 or 1.7 per cent per annum (after all costs but before taxes) of the retail sector at 4.6 percent, compared to the industry sector at 6.7 percent or to the rest of the system at 6.3 percent.
“At March 2017, retail sector assets was $577 billion; if the retail sector had performed in line with the rest of the system, then the outcome of the whole system would have improved by about $10 billion per annum,” he claimed.