MySuper will cost more, not less
MySuper could well result in Australian workers receiving lower superannuation payouts rather than the higher outcomes suggested by the Cooper Review, according to Sydney-based research house Chant West.
Chant West principal Warren Chant said that while the MySuper concept had a certain superficial appeal, it failed to recognise that there was a difference between price and value.
“In super, as with most things in life, you get what you pay for,” he said. “Sometimes it is better to pay a little more if that means the product performs better and lasts longer – and that’s what you want from super.”
Chant said the Cooper recommendations had treated superannuation as a homogenous product where the only differentiating factor was price – but that was not the reality.
“There are qualitative differences between funds. The better quality funds, in terms of investment performance, tend to have higher investment fees because of how they invest and what they invest in,” he said.
“But there is strong evidence that those higher investment fees pay off because they produce better returns,” Chant said. “In other words, the additional return is greater than the additional fee incurred to achieve it.”
He said that the forecast cost savings from MySuper were hugely optimistic, and were likely to be eclipsed by the reduction in benefits resulting from reduced returns.
Recommended for you
Financial Services Council chief executive, Blake Briggs, is urging Minister for Financial Services, Stephen Jones, to take advantage of the QAR opportunity to reduce regulatory duplication and ensure advice is affordable.
Former chair of the House of Representatives’ Standing Economics Committee, Tim Wilson, is planning a return to politics after losing his seat in the 2022 federal election.
Morningstar is going to offer research ratings of funds in the $3.5 trillion superannuation sector for the first time in response to demand from financial advisers.
Treasurer Jim Chalmers has opened a consultation into the design of the annual superannuation performance test, canvassing views on a range of reform options.