Media Reports: How Super Rules Limit Competition

The launch of our report yesterday on how changes under the Fair Work Act to superannuation requirements stifle competition and innovation, has attracted significant media interest.

Here are three pieces worth reading closely:

 The Australian (Paywall Protected) – Super rules limit competition, report says

COMPETITION to manage the super contributions of workers who don’t choose their own fund is being strangled by excessive, pro-union regulations, a new report argues.

 

The federal government’s decision to limit the number of funds that can be listed as default funds in modern awards to about 15 from 2015 — against the advice of the Productivity Commission — will bias the industry in favour of the status quo, says Barry Rafe, a former head of the Actuaries Institute.

Click HERE to keep reading

MoneyManagement.com.au: No Proof that Industry Funds are Surpirior

There is no data to support claims that industry default funds outperform retail funds because of their not-for-profit status or superior governance model, according to new research published today.

 

The research, undertaken by superannuation consultant and former Australian Institute of Actuaries president, Barry Rafe, and published by the right-wing think tank the H.R. Nicholls Society today, has argued that superior performance of industry funds is much more likely owed to the industry funds successfully exploiting their early competitive advantages to the benefit of all superannuation members, and industry funds investing in unlisted property trusts rather than the listed property trusts generally favoured by for-profit funds.

 

Further, the report argues that industry funds have now lost their competitive advantage and that the conditions that led to industry fund out-performance are unlikely to be repeated in the future.

 

Notwithstanding this, the report argues that the default funds under modern awards regime will serve to entrench the interests of many of the major industry funds “not because they are the most innovative, provide superior service, are best governed, have the best anticipated investment performance or have the most capital backing them, but because they are already well-established in the system”. “This does not appear to be an outcome that is in the employee’s best interests,” the report said.

 Click here to keep reading

Wealth Professional: Foul Called on MySuper

Barry Rafe of Rafe Consulting has prepared a report into the new Fair Work Act rules for superannuation, after being commissioned to do so by the HR Nicholls Society.

Rafe has found the changes to be anti-competitive in that they entrench the industry funds and are biased against new entrants to the market. He said the changes will achieve the opposite effect to what the Productivity Commission intended, which was that:

“[T]he selection of default products for awards should be merit rather than precedent based, and should encourage improved performance through competition”.

Of the listed default funds in modern awards, 50% are industry public offer funds and a further 20% are industry non-public offer funds. Rafe concluded that existing default funds will be embedded purely on precedent and will have a compelling argument to extend their listing across all awards.

Click here to keep reading.

You can access the full report HERE.

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