Judith Sloan is right - the Department of the Treasury has moved from
champion of free markets to craven promoter of rent-seeking
Unfortunately there is no government department to resist the siren call for protection and favours sought through rent seeking. Perhaps this shouldn’t be surprising given that the entire climate change apparatus is a massive rent seeking exercise.
The rorting we observe in unions (which extends to their influence over the ALP) is precisely because of the honey pot of money available through industry super funds. If unions survived purely on member subscriptions, they would have shrunk long ago. But their rent seeking skills have given unions a new lease of life (shamefully the Coalition Government didn’t act against industry super funds when it had the opportunity) corrupting the union movement and our government. Now the Coalition is agreeing to increase the superannuation guarantee to 12 per cent, ensuring even more money is shoveled into these funds.
Unions (just as companies) should be explicitly excluded from owning / managing superannuation funds – they are hopelessly conflicted in their duties to their members versus their duties as trustees. We should have superannuation funds run by independent persons unconnected to both the employer and union.
Look into to the 1973 Foundation (liar’s party property trust). Now there’s some rent-seeking. They are landlords to several government departments in Canberra. Hawke and Keating put a massive impetus into centralising the public service. I’m sure it was just a coincidence that the property trust was buying up buildings and getting great development deals from the government, in advance of every decision to bring more public servants to Canberra.
Industry super funds enjoy a close relationship with the windmill industry which relies entirely on government (on both sides of the House) for its very existence – thus closing the circle.
Nice work unless you are a taxpayer or electricity user.
I don’t like the ALP and I don’t like the unions but I’ll be stuffed if I’ll condemn anyones right to own and run a super fund. The only changes that need making are to ban the lack of choice of funds, no fund should be default, everybody should be forced to nominate and no fund should have prominence but aside from this choice I don’t think that anyone should be avoiding super contributions who is not able to avoid using a private bank to receive their pay. You can’t have it both ways.
Hang on – something does not compute here.
Correct me if I’m wrong, but don’t some companies (such as the banks and investment companies like Pperpetual, AMP etc) already own and manage retail and wholesale super funds?
Further, don’t employess of say, ANZ bank, have their default staff super fund run by ANZ bank executives as trustees?
So are you saying investment companies like Perpetual and AMP or banks like NAB and ANZ should be banned from running super funds?
if so, should they be banned from running all super funds, or just those for their own employees? I don’t get it.
Likewise, while I’m not entirely confident about the trade unions’ ability to run super funds (would have though a business executive would be much more savvy) – what’s the inherent conflict of interest? Surely as trustees their duties are clear – to act in the best interest of members, as is their (theoretical) duty as heads of the union.
Likewise most companies normally at least try to treat employees well, so how is this a conflict with runnign a super fund in the best interestb of their members.
If you ban both groups from running super funds, who’s left to do it? Retired judges?
My take on the whole superannuation thing has been that at some stage we would get a Labor Government into power, and no matter what the laws were, they would be changed so that the Party would get its hands on the money.
I’ve been pretty much vindicated by the Windmill and Water scams.
Are there any Superfunds out there who are not exposed to these bottomless pits?
Tripe. All we need is the same transparency about remuneration and contractual benefits that apply to public companies. The workers will soon put a stop to the rorts when they see where their money is going.
No, do it yourself. An SMF is pretty straight forward, and who better to look after your interests than yourself?
I’m saying that employers and unions should not run super funds for employees. There is an inherent conflict of interest. I’m not saying that AMP etc should be banned from running super funds – just that AMP should not run a super fund for AMP employees.
Keith is right – an SMSF is the best option
I am concerned about the voting rights attaching to the shares.
Despite hundreds of retail and industry funds, there is not a single one which gives to members the voting rights attaching to the shares they beneficially own.
I suspect the votes are exchanged for favours, selling out the superannuants.
At the very least, disclosure is required.
Superannuation would be obsolete if the top rate for most people was 15%.
Stop the tax churn and introduce a TABOR and most people wouldn’t have to pay any income tax on investment earnings.
If competition between Unions was allowed, only the ones who looked after their members best interests would exist.
If there’s need for more transparency then I’m all for that, but I’d be pretty resistant to banning of corporate and industry super funds. Look at performance comparison from 1996->2011
http://www.bigpondmoney.com.au/industry-super-fund-compare-retail-super-fund
corporate funds – 5.84% pa
industry funds – 5.35% pa
public sector funds – 6.30% pa
retail funds – 3.66% pa
I have most of my super in a corporate fund and some in a retail and the above matches my experience pretty closely too (corporate fund has much lower fees and better overall return than the retail fund. Perhaps because the corporate/industry funds don’t see the running of the fund as a profit centre and so return more of the investment returns to the members.
As an aside the side benefits I get from the corporate fund are also much better (eg very good income protection and death/disability insurance are included – and the overall fees are *still* lower)
I do think you have to be careful in keeping track with corporate/industry funds as to where they are investing – eg you don’t want your corporate super fund investing in the company itself like essentially happened with 401k funds in the US.
You’re kidding right? It’s a mountain of bureaucracy and paperwork that would be beyond most people. Financial planners
why not? where’s the conflict of interest? By the same rationale should Qantas not offer its staff discounted flights?
Edit alert. was going to say that financial planners have capitalised on the SMSF industry to help decode the complexity of SMSF for a fee of course.
Self managed funds are difficult and expensive because you have to pay independent auditors every year.
Super funds are all pretty much rubbish. The average return has been less than a savings account.
Aside from the potential corruptive nature of the money paid to those on the boards, the risk of conflicts of interest in investment policy is obvious. The lack of transparency is a key factor here. Not just that Judith’s article itself shows the conflicts on both the employers and employee (union side), but in the investment policy also. No one side is free from these conflicts and it doesn’t seem that long ago that corporate super funds were used to purchase and use shares in the company in various corporate plays (and protections) no matter what the true interest of the employees were in those corporate manoeuvres.
On present potential conflicts (eg BBC Pension fund investing in “environmental’ areas being in possible conflict with its supposed ‘fair and balanced’ broadcasting mandate), why not have the level of disclosure demanded of American superannuation/pension funds?
If an employee has the ability to choose where to have his or her super payments invested, why shouldn’t they have the right to disclosure that, say, CALpers, the huge Californian government employees pension fund has?
http://www.calpers.ca.gov/eip-docs/about/pubs/annual-investment-report-2011.pdf
SMSFs are good value if they’re of sufficient size. Our management fee annually is 0.5% of funds (plus auditing and other nuisance compliance costs, of course). Our ofspring are compelled to pay into their respective industry funds for employer-funded payments, but at the end of each FY they roll their balances into our family SMSF. There are inheritance and taxation issues in this arrangement. When the spouse and I die eventually in the dim distant yonder, the capital left from our portion will not be subject to the stealthy 16% death tax that applies to inheritance of superannuation for non-dependent heirs, as the ofspring are fellow trustees of the fund. There’s no financial duty on transfers between super funds, either.
But Swanny and Penny are said to be cooking up a plan to tax self-funded retirees aged over 60 on a PAYE basis and introduce the same death taxes that apply to industry and retail funds. Over-60s are presently tax-free thanks to that good man Peter Costello, but maybe not for much longer.
I agree Samuel J,
When the sun and the wind is no longer subsidised we will find that our superannuation money is gone…
Hence the increase to make up for the whispering wind….
And did I say anything about control of industry funds….
Did I mention 1987….
October 1987 is the end of the run….
Anyone that has a contract to ‘sell’ electricity into the grid is a thief.
So why wont October 2012 be the next crash…..
Let’s see the greatest Treasurer, and his Department, handle that one….
MareeS, I saw that little announcement the other day. As usual the socialists are going after other people’s money.
SMSFs are far too complex at present and just the accounting and audit fees for a very straightforward fund in cash and shares are around $2500 a year.0.5% of the fund doesn’t sound like much but it is nearly 10% of your total return on the fund each year assuming 5 to 6% return.
Still not convinced that, for example ‘AMP should not run a super fund for AMP employees’
If that’s their core business, they’re simply offering their staff access to their products – presumably at a discount. By that rationale would you ban McDonalds from giving its employees discounted meals?
The ‘conflicts’ that Ryutin identifies above aply no more or less to union memebrs or company employees than the do to retail clients. if mroe transpareny is required, that’s a separate issue.
AMP staff should have the choice to go elsewhere (I think they do), likewise so should union members. As long as that rule is observed it’s all cool. If the union or AMP is crap at running the fund or shovels money into dodgy pet projects people will leave. Not to mention the fund attracting the ire of APRA.