How is your Super performing

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Yeah....interesting reading, but just another financial opinion.

No one really knows what is going to happen.

[enf]

Why does ASIC even exist if not to reign in the shysters...they seem powerless and useless to me.



Paywalled...........

Superannuation fees disclosure move delayed again

Anthony Klan
Journalist
Sydney
@Anthony_Klan

Long-mooted moves by the corporate regulator to close a vital loophole that allows retail superannuation funds to avoid disclosing all the fees they charge — already delayed by well over a decade — have again been pushed back indefinitely.

The Australian Securities and Investments Commission, whose chairman James Shipton will on Thursday front an event run by the nation’s retail lobby group to give a “keynote address”, today confirmed any changes to the loophole will likely be delayed many months, potentially years.

The current guidelines surrounding fee disclosure by super funds, called RG97 — standing for Regulatory Guide 97 — have been around since March 2006 but they still do not require all super funds to disclose all the fees and charges they extract from the nation’s retirement savings.

Because of legally mandated super contributions, the sector has now grown to a massive $2.6 trillion — representing the fourth biggest pool of pension funds on the planet — but ongoing failures by regulators, including by ASIC, have left much of that money open to widespread fee-gouging.

As previously revealed by The Australian, a legal loophole, previously little known outside select groups of super fund managers themselves, has meant that while there are strict rules governing how trustees deal with super money they manage, the actual penalties around those laws have been carved out of the relevant Act.

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That means that giant fund managers cannot even be forced to pay, say, a $10 fine for gouging billions of dollars of the public’s super over many years.

In March ASIC deputy chairman Peter Kell told a Senate estimates committee — which regulators and other bodies are legally required to front if asked — that the regulator had felt pressured to place RG 97 changes on hold because of pressure from super industry lobby groups.

“Participants right across the superannuation sector had raised a series of concerns around the requirements that were being developed around disclosure under regulatory guide 97,” Mr Kell said at the time.

“There were ongoing and significant issues around whether the regime was workable, whether the particular requirements were being interpreted correctly, whether there were practical ways that it could be improved.”

The corporate regulator today released an “external report” on RG97.

The report, commissioned in November last year, said “changes to the disclosure regime would be advantageous”.

ASIC said it would release a “consultation paper” setting out ASIC’s “proposed response to the issues raised” in the report in the “first half of the 2018-19 financial year” — which means sometime before New Year’s Eve.

Industry would then be called on for yet more responses — formally, aside from any behind-the-scenes lobbying — with the view to ASIC, at some undetermined time in the future, amending the guidelines to improve disclosure in the sector.

Governance Institute of Australia chief executive Steven Burrell said longstanding poor transparency for consumers in the super sector, and the resulting lack of competition that produced, were key contributors to billions of dollars being gouged from the sector in recent years.

Comment has been sought from ASIC and Mr Shipton.

In the same vein..................FFS........APRA are just as bad........................crooks!

Watchdog failed to act on warning over super fees


As revealed by The Australian last week, the super industry over the past two decades has charged more than $700 billion in fees above what typical super funds charge overseas.
As revealed by The Australian last week, the super industry over the past two decades has charged more than $700 billion in fees above what typical super funds charge overseas.

The Australian
12:00AM July 23, 2018

Anthony Klan
Journalist
Sydney
@Anthony_Klan

The regulator responsible for the nation’s $2.6 trillion superannuation nest egg was warned by its analysts eight years ago that the major banks and finance companies were charging members more than 2½ times the market rates for services, delivering them billions of dollars a year in extra profits.

A 2010 research paper published by the Australian Prudential Regulation Authority — which can now be accessed only via a federal government archive — shows excessive fees charged by the managers of the retail, or for-profit, funds have been systemically eating into the retirement savings of millions of workers.

Despite the peer-reviewed academic paper being written by APRA’s own analysts, including then APRA research head Bruce Arnold, the regulator has not only failed to take any significant steps to address the issue, it has disbanded the research unit.

The paper, published by APRA in July 2010 by Dr Arnold, a former US investment banker whose PhD is in finance, and his colleague Kevin Liu, who now also holds a PhD, specifically in the field of superannuation fees and charges, found “strikingly dif#ferent” fee models were being used, which had a major impact on investors in retail super funds.

As revealed by The Australian last week, the super industry over the past two decades has charged more than $700 billion in fees above what typical super funds charge overseas, according to research by University of NSW economist Nicholas Morris.

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The APRA paper, which called the nation’s super system a “$1.23 trillion laboratory experiment of global interest”, compared the costs of services, such as administration fees and funds management costs, paid by not-for-profit, so-called “industry” funds, and by retail super funds.

It found that when members of an industry fund, such as #AustralianSuper, were charged for a service, they paid exactly the same rate regardless of whether that service was provided by the managers of the fund (or #related parties of those managers) or an outside company was contracted to perform the services.



In each case the members of the fund were charged, for all those services, an annual fee equating to 0.51 per cent of the total value of the fund, which is the market rate.

When members of retail funds, such as those operated by the big four banks, and financial services giants AMP and IOOF, were charged for a service provided by an outside company, they paid a rate of 0.52 per cent a year — an almost identical cost and in line with the market rate.

When the managers of the retail fund or its related parties provided the service, the annual fee charged was 1.33 per cent of the fund’s assets: more than 2½ times the market rate.

“The largest difference relates to administrative services, where we find strikingly different fee models used in different contexts,’’ the report said. “For independent #admin#istrators and not-for-profit #related-party administrators, the fees predominantly relate to the number of members in the fund. In contrast, retail fund related-party administrators charge a large fixed fee plus a variable component based on assets under management.

“These different approaches result in the median fund paying $12.2 million in fees under the retail-related administrator model, versus only $2.3m to service provider who was independent or NFP-related.”

Dr Liu said there remained zero doubt the “systemic underperformance” of retail funds was due to the charging of excessive fees by the major banks and financial institutions.

“The theoretical argument is there can be many reasons for the underperformance of the retail funds … such as that analysis ‘doesn’t compare apples with apples’,” Dr Liu said. “But we have created performance benchmarks … this is not difficult and the methodology is not new. This systemic underperformance is not (due to) asset allocation. It’s not an investment manager’s skills. It’s fees and charges.”

APRA declined to comment.

Across the sector, which overall has more than doubled in size since 2010, with every worker forced to contribute 9.5 per cent of every pay cheque into the system, these fees have collectively delivered tens of billions of dollars to the major banks and finance companies.

Those returns have flown through to the executives and managers of those big four banks and financial institutions by way of multi-million-dollar salary packages and bonuses.

Dr Arnold and Dr Liu’s 2010 APRA paper used a comprehensive data set of super fund performance from 2006, which APRA had compiled as part of a one-off increased data collection exercise, to compare 115 of the nation’s super funds which each held more than $200m.

Dr Liu and fellow researcher Elizabeth Ooi have this month published a new report, based on data reported to APRA for the year to June 2016, that finds “severe” overcharging by retail funds continues.

Despite the managers of the nation’s super having specific legal responsibilities under the 1993 Superannuation Industry (Supervision) Act, a carve-out put in place when the law was introduced in 1993 by the Keating government means they do not face penalties for breaking any one of those laws.

The federal government has proposed some changes to the super law but the changes do not reverse the carve-out.

The ALP has said it would not support the proposed changes, now before the Senate, on the grounds the changes are “limited and incomplete”.