The debate over whether crediting rates or unit pricing is the better value attribution model for a superannuation fund has clouded a more important question of whose interest the frequency of attribution is made in, according to business systems consultant Askit Consulting.
Jules Gribble, director of Askit Consulting, told an audience dominated by industry superannuation funds at the CMSF conference in March that the push towards daily, even intra-day, unit pricing may not be in the members’ best interests. “Just because we can do daily pricing, should we?” he asked.
He questioned whether funds were actually putting the members interests first or rather were they acting on a competitive instinct – demanding daily unit pricing simply because the competition were doing it. He recognised that ratings houses and the findings of the joint parliamentary enquiry into the superannuation industry last year preferred daily unit pricing, but said there were problems that might have arisen from the practice that may not have been considered. One problem was that daily unit pricing encouraged a short-term outlook where superannaution was meant to be a long term investment.
He said while some – usually very few – individuals did like daily unit pricing in their super, it was never the majority of a funds’ members. He said he disagreed with the argument that it was more equitable. On the contrary, was it not unfair to make all members pay for the administrative cost of having the process in place?
Gribble said weekly unit pricing would make more sense, and possibly even make for more realistic prices. “With daily unit pricing, the fund is running so fast they don’t have time to pick up the errors,” he said. He later told Investment & Technology many prices are not up to date anyway, such as overseas assets, which may take up to two days to come through.
Gribble did not promote one form of value attribution over another, saying in theory there was no big difference between crediting rates and unit pricing as a method to value a fund’s assets. “They are different means to the same end,” he said. However, the increasing scrutiny on governance, transparency and explicit accountability in super funds would put more pressure on crediting rate regimes as more frequent valuation was required, and unit pricing lent itself to being more tightly tied to the underlying assets.