Interestingly, in trying to defend the status quo against proposed changes, key industry players have now put on the public record their own motivations and how those drive their actions. The biggest disappointment in the Senate Economics Legislation Committee hearing into the Your Future Your Super Bill before parliament hearing has been the lack of any member’s perspective or focus on lifting member retirement balances.

Instead, it has been all about the funds themselves – fund accountability, fund expenses, fund returns, fund fees and fund mergers and how unfair these proposed Bill changes are to funds.

The Your Future, Your Super Bill, the Senate Committee, APRA, industry associations and funds are all missing ‘the wood for the trees’, caught in a finger pointing loop, without an incentive to address the principle question of how to best lift members’ retirement balances.

As the Senate committee chair highlighted “this is a system that is not working well, and it is a system where we allow the industry to have a say on its rules, which is probably quite unusual but very generous of us. There are very few independent voices in this space, which is a concern. It makes it very difficult to get to the nub of the issues”.

The system is not working well because members’ retirement balances are too low.

Editor’s Note: This is the first in a series of columns contributed by Douglas Bucknell (pictured) addressing the Your Future, Your Super proposed legislation and its progress into law.

After a working lifetime and a compulsory super contribution (currently 9.5 per cent) that could otherwise have been directly invested and saved, average retirement balances for Australians (excluding self-managed funds) are just $86,903. Worse still, in 14 million MySuper accounts (where the bulk of us reside), balances average just $44,745.

No fund yet discloses (although it is individually recorded on most members’ annual statements) what the average projected retirement balance is. Why not? Surely that is a key accountability measure for Funds. 65-year-olds currently have an average retirement balance in the order of $250,000, meaning many have much less. Most quickly exhaust their Super, with more than 75 per cent relying on the full or part age pension. That’s a high percentage, and it’s not going to drop much by 2050.

So, the industry may crow about being world class and having the highest fund average returns/biggest size/lowest fees, but without linking that to members’ retirement outcomes and projected retirement balances it means very little to the member.

Members largely remain disconnected and disengaged, at least until their own balance grows and retirement nears. By that stage they have missed out on the opportunity to actively target higher retirement balances, via compounding and higher growth options. Instead, they have relied on our so-called world class system and fund executives and trustees to have taken those actions for them. Problem is, they haven’t.

As Xavier O’Halloran (Choice/Super Consumers Australia) neatly told the committee, “for too long, trustees have been left alone in the dark with our money”.  BTW, his organisation’s funding is now finished. So as the Jack Johnson song goes…

“Where did all the good people go?

I’ve been changing channels
I don’t see them on the TV shows.”

Those good, independent people are stuck watching on the sidelines, wearied by the endless circular debate. As one set after another of hard-fought reforms and sensible recommendations is overtaken by further proposed changes, the industry continues to feed on its own reputation, fails to innovate and becomes more disconnected from its members.

Why have trustees been ‘left in the dark’, with little effective accountability for improving members’ retirement outcomes? Surely the industry’s ‘trust structure’ and its competitive nature, as well as oversight by the regulator APRA and parliament, would have ensured this didn’t happen.

Future articles in coming weeks will explore the motivations and business structures causing the super system to under-perform are explored in broad, simple terms, from a member’s perspective.

Douglas Bucknell is the Managing Director of Tailored Superannuation Solutions Pty Ltd, a company introducing better MySuper default design. Bucknell is a strategic adviser to boards, former fund CEO and APRA manager. He has a career in public sector super and financial markets.
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