Default super fund offers big savings
Sydney Morning Herald
Wednesday September 30, 2009
A LOW-COST default superannuation fund could add about $100,000 to the retirement savings of the average worker, argue proponents for a government-run scheme for retirement savings.The Australia Institute is calling for a simple, low-fee fund to act as a backstop for workers who pay little attention to their super savings.The fund, called a universal default fund, would help check the proliferation of multiple and lost superannuation accounts, and also protect workers against hefty fees levied by some fund managers.In a submission to the Government's review into the super system, released today, the institute argues the proposed fund would stem some of the $14.3 billion paid each year in fees to the financial services industry.For a worker on average earnings, the default fund could deliver them an extra $100,000 in retirement compared to the costs of some high-fee funds.David Ingles, who co-authored the report with Josh Fear, said the importance of minimising fees was critical in Australia's compulsory super system, but acknowledged the idea would meet fierce industry resistance."We do not have any illusions about the politics involved here, Dr Ingles said. "There are quite a lot of people that make a lot of money from the current system and they will lobby hard to maintain it."The proposal would apply to between 6 and 16 per cent of the workforce who do not have a default fund specified in their award or workplace agreement, but would also be available to others wanting to join.The fund would be passively managed, allocating fixed proportions to local and foreign shares, as well as cash and bonds."We are proposing a very simple model that doesn't require any expertise really," Dr Ingles said.Elissa Freeman, a policy officer at the consumer advocate Choice, said she welcomed the proposal, particularly because it would prevent workers losing money in old superannuation accounts.A study released yesterday by the industry group Investment and Financial Services Association showed that Australian funds had some of the highest management fees in the world.But the chief executive of the association, John Brogden, said international comparisons of superannuation funds were difficult due to the different regulatory environments.
© 2009 Sydney Morning Herald
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