It’s time for the Government to step in to improve handling of the small and lost account balances of super fund members given that self-regulation of the eligible rollover fund (ERF) sector “does not appear to be working”, according to Jeff Bresnahan, managing director of SuperRatings.
Releasing SuperRatings’ latest ERF Sector Review yesterday, Bresnahan said: “The ERF sector in its current form continues to be justifiable only by those who benefit from its revenues… It appears that not enough is being done to protect these accounts from gross fee stripping.”
The report recommends:
. Setting a maximum fee scale for all aggregated costs associated with ERFs. Current fees average 2.25 per cent, which is more than double “what could be reasonably expected”.
. Introduction of a compulsory single cross-matching facility between ERFs, the Taxation Office and eligible super funds to increase consolidation. Auto-consolidation may also be an option.
. Requiring trustee directors of ERFs to disclose all other directorships including identification of possible conflicts of interest.
. Requiring that all ERFs establish public websites including PDSs, annual reports and audited financial statements.
. Requiring that super fund trustees who are required to nominate an ERF formally review the nomination at least every three years.
The SuperRatings review, for the year ended June 30, 2008, showed that membership of ERFs jumped 12.8 per cent to 5.885 million accounts, which was more than twice the increase for superannuation.
Total assets in the sector were $5.45 billion at the end of the period, however the average account balance declined 14.3 per cent to $927. The average fee charged on a $1000 balance had increased 15.7 per cent during the past three years. Total fees deducted from ERFs during the year were estimated at $125 million.
SuperRatings gave out only one top ‘platinum’ rating
among the 15 ERFs assessed – to the not-for-profit AUSfund. Gold ratings were
awarded to AMP, SuperTrace and NPT.