Super Fund Reform Two Decades Too Late Says Industry

Post by NeilMc on March 16, 2010 · Under Business News, Super Funds, Wealth Management, investments · Comment

Kevin Rudd’s government says it full intends to follow through with controversial new regulations for the superannuation industry despite vehement opposition from the sector.

Jeremy Cooper who heads the government inquiry into the superannuation industry, also known as the Super System Review, told industry participants that whilst the government did not seek to cause unnecessary disruption or costs, the current system needed to be “recalibrated” since it resulted in far too many investors being disengaged with their investments.

Last year Mr. Cooper unveiled new proposals which would classify super fund members based on their level of involvement with the management of their super.

This would mean that members, who were not actively involved and failed to make investment choices, would have their money placed in a universal category, which is a low cost fund that has a single diversified investment strategy.

The industry responded to the proposal by making a joint submission which said that the new regulations are too drastic and would result in increased complexity and higher costs.

During an annual industry conference held in Sydney on Monday, many industry participants ratcheted up the rhetoric, suggesting that the proposals were two decades too late, with many in the industry arguing that it would have been better to introduce such measures at the same time as when the compulsory super was first launched.

Mr. Cooper, former chairman of the Australian Securities & Investment Commission (ASIC) responded by saying that despite some sectors of the super fund industry finding the universal model quite challenging, the issue of rising costs had to be addressed.

Mr. Cooper said that the right of all Australian’s to choose their own investment fund had the inadvertent effect of driving management fees upwards, as managers spent more money marketing their various bells and whistles.

Mr. Cooper says that the proposals also sought to reduce costs and save the industry roughly $1 billion a year through the streamlining of back office functions, with a drive to make the industry paperless, and all transactions electronic.

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