Why superannuation should be nationalised

The Australian

20 March 2017

Alan Kohler

Last night industry super funds launched a new TV ad showing a besuited arm, obviously a banker, letting foxes into the henhouse. The industry funds are understandably sick of defending themselves against constant political attack, even though their investment performance and governance are clearly superior to the bank-owned retail funds that the Coalition supports.

So they’re fighting back.

According to ChantWest, the 10-year performance figures are 5.5 per cent per annum for industry funds and 4.6 per cent for retail funds. An Industry Super Australia presentation puts the 20-year performances at 6.3 per cent for industry funds and 4.5 per cent.
As I have written many times, the Government should be asking why the bank funds are performing so badly, instead of trying to nobble the better performing industry funds.

But there is a deeper problem here in my view: those figures are averages of a very wide dispersion of results. There are 43 industry funds, more than 100 retail funds and 110 MySuper products.

So quick, tell me which of those 270 or so super funds is going to provide you, or your staff, with the most comfortable retirement in 40 years’ time?
Nobody has any idea of course — not the employee, the employer, the funds themselves, or any expert financial adviser for that matter. It’s impossible to know because, as the warnings always state: past performance is not a reliable guide to future performance. The future is unknowable.
In any case, past performance data is not provided to individuals when they have to choose a fund; it’s possible to get it, but not easy. So even if the data were meaningful it’s not readily available.

The only meaningful data concerns fees, but that’s not readily available — or comprehensible — either, and it’s not the main thing anyway. The only thing that matters in the end is how much money you end up with, which is all about the return and compound interest.

Superannuation is the only product where choice and competition are not only completely pointless, they are counter-productive.