ScoMo tightens the noose on Superannuation scandals

A decade of massive change in the superannuation world Super changes.
Rod Myer 10:03pm, Jan 1, 2020 Updated: 10:52pm, Jan 1


Superannuation was fairyland for the wealthy till Turnbull government changes. Photo:Getty

The decade just gone was one of remarkable change in the world of superannuation. Back in 2010 super was a kind of financial fairyland for the well-to-do but benefits in the system have been pruned since then.

Thanks to the largess of Treasurer Peter Costello a decade earlier, all super accounts went tax free for anyone over 60 who had gone into retirement.

There were some big balances swishing around in the system because Mr Costello had also allowed a one-off transfer of up to $1million into super in 2006 for anyone who had the kind of cash to fund it.

Even even after the $1million window closed, large contributions were possible because the contribution caps were so big.

For concessional caps the limits were $25,000 or $50,000 for those over 50 while non-concessional limits were $150,000 or $450,000 over three years.

Now concessional caps have been cut back to $25,000 for everyone and $100,000 a year or $300,000 for three years up front for non-concessional.

In 2017 the Turnbull government further squeezed big balances by placing a $1.6million cap on tax-free pensions and banning anyone who had reached that from making extra non-concessional contributions.


Source: APRA and ATO

MySuper arrives
During the Rudd-Gillard years, a series of financial reforms were introduced that resulted in the MySuper revolution that began from January 2014.

From that date all default super funds that receive the super contributions of those who don’t choose their own fund had to meet MySuper criteria making them low cost and efficient.

Most not-for-profit funds fitted the criteria anyway but one result has been the emergence of a range of new retail for-profit funds providing low cost options to members.

Ten years ago there were no MySuper funds but today they account for 28 per cent of all funds in the super system.

Borrowing balloons
Self-managed super funds are allowed to borrow to buy property and during the last decade this practice blew out dramatically. Back in 2010 SMSFs had $768 million in borrowings but by September 2019 this had blown out dramatically to $43.07 billion.

Regulators worried that was helping blow out the property boom that ended in 2017 and clamped down on it. Now none of the big four banks or Macquarie will lend for the purpose so total loans to SMSF are no longer growing.

Industry funds grow dramatically
The not-for-profit industry and public sector funds have grown dramatically relative to other fund types over the decade.

Industry funds now account for 25 per cent of super assets under management compared to 18.5 per cent 10 years ago. Public sector funds have grown also, to 23.6 per cent of the sector from 15.5 per cent.

The growth of the public sector funds has, to a degree, come because they have branched out from public sector workers to take contributions from anyone who wants to join.

Retail funds have lost relative position, accounting for 22.5 per cent of super assets compared to 30.6 per cent a decade ago.

SMSFs have slipped from 31.9 per cent of funds under management to 27 per cent.

Retail funds have sunk for a number of reasons including an ageing demographic, weaker relative returns and scandals emerging from the Hayne banking royal commission.

Public concern about those scandals saw $31 billion flow out of retail funds, mainly to industry funds.

Returns booming



When the voluntary superannuation system started back in 1992 it was expected funds would return about 3.5 per cent above the consumer price index [CPI].

However returns for the average balanced, or growth, fund used by about 80 per cent of members have far exceeded that target and for this calendar year look likely to return 14.5 per cent.

Indeed since 1993 when the system commenced there have only been four years of negative returns and 14 years of returns in double figures. Had funds been returning what was expected in 2019 they would have returned 5.2 per cent, not 14.5 per cent.

There has been one major difference in returns between for-profit and not-for-profit funds, however.



The average return for industry funds has been 7.2 per cent over 20 years while for retail funds it has been 5.4 per cent according to the Parliamentary Economics Committee.


[ltr]https://thenewdaily.com.au/finance/supe ... on-change/[/ltr]

There are predictions of a shake up in the Super Fund industry.

Can only see this as another financial scandal being downplayed, something not addressed by the RC that may be disclosed affecting Pension Funds (superannuation) run by the same who have been involved with the criminal misconduct already disclosed. 

CEOs only leave when mismanagement is addressed & companies merge to make it harder to find the corruption within. 

Another scandal involving pensions/super is looming..part of the corruption within the financial system, not the economy failing.

Wonder how the Union Industry Finds will go as they are propped up by union harassment of industry ?



Steve Bracks flags ‘fewer but larger funds’ as superannuation industry enters new era
Euan Black 11:59pm, Jan 14, 2020 Updated: 12:10am, Jan 15


Steve Bracks has said the super industry will struggle to sustain double-digit growth in 2020. Photo: TND

Superannuation members should expect more moderate returns and big-name mergers over the next decade, according to Cbus chair Steve Bracks.

In a wide-ranging interview following the announcement of CEO David Atkin’s resignation, the former premier of Victoria told The New Daily it was unreasonable to expect the industry’s bumper returns to continue into 2020.

Not least because economic growth is subdued and global uncertainty remains high.

“In the short-term, we will see returns lower than they have been,” Mr Bracks said.

“They’ll remain above the CPI, but they may not be the double-digit returns that we’ve seen over the past few years – and that’s just to do with the economic conditions, both domestically and internationally.”

Pension research company Chant West estimated in early December that Australian superannuation funds would deliver an average return of 14.5 per cent in 2019.

But a combination of low interest rates and low inflation have led some analysts to conclude that asset prices are either overvalued or nearing full valuation.

The hunt for yield
Low interest rates have increased demand for riskier assets and have consequently driven up prices, they argue, making it harder for them to rise higher still.

And with interest rates around the world either negative or just above zero, central banks have limited room to boost growth should economies continue to underperform.

Mr Bracks believes these analysts may have a point.

“So we can expect some softening over the next 12 months,” he said.

For some members, though, the fall in returns could be offset by “an emphasis on providing more value for money”.

Much of the industry’s focus in recent years has been on eliminating unnecessary fees and removing underperforming funds from the system.

Mr Bracks said these efforts had maximised returns for members, who could expect more of the same heading into 2020.

More mergers on the cards
“There will also be fewer but larger funds,” he added, referring to a spate of recent high-profile mergers.

“We’re seeing a significant move of the banks out of vertically integrated wealth management and super funds – and other funds will probably acquire those super funds in the future.”

Such mergers will take place at a time of increased scrutiny into the superannuation sector, after Treasurer Josh Frydenberg announced an inquiry into Australia’s retirement income system.

Led by former senior Treasury official Michael Callaghan, the review will analyse the system’s impact on public finances and determine whether it is well placed to meet the needs of Australia’s ageing population.

Mr Bracks conceded that Australia’s shifting demographics pose significant challenges for the sector, arguing Australia could potentially benefit from a retirement age that varies across different sectors.

“One size does not fit all,” he said, adding that certain Scandinavian countries had already introduced a variable retirement age.

“Someone might have the capacity and ability to work in professional services to aged 70 or 75. But in manual work, or construction work, probably only to 50 or 55. ”

End of an era for Cbus
On the topic of David Atkin’s resignation, Mr Bracks said he was “eternally grateful for the contribution David’s made over the past 12 years”.

“David has been CEO of Cbus for over a third of its existence and over that time the fund has become an industry leader and a sophisticated global investor,” Mr Bracks said.

“While we are obviously very disappointed to see David move on, we congratulate him for his achievements and his dedicated service to the men and women of the building and construction industry.”

Under Mr Atkin’s leadership, Cbus has increased its funds under management from $12 billion to $56.5 billion.

Mr Bracks said the departing CEO had presided over a “great transformation” and maximised returns for members by numerous investment arms in-house.

And AustralianSuper chief executive Ian Silk told The New Daily Mr Atkin had “demonstrated his breadth of vision in his contribution in many other fields”.

“He is recognised internationally as an authority on sustainable investment and climate related investment,” Mr Silk said.

“He’s also been a champion for increasing diversity and inclusion.”

Mr Atkin will leave Cbus in mid-2020.

His replacement has yet to be chosen but Mr Bracks said an extensive search was already well under way.

https://thenewdaily.com.au/finance/superannuation/2020/01/14/david-atkins-cbus-super/

I would never allow somebody else to manage MY money! I have no idea about the current rules for Superannuation but my small "pot", I used some to pay off a Mortgage and the balance I rolled over and placed in "cash", and I get a Pension as well ....  I don't get charged a lot either and they cannot fiddle with my money!

A big problem with SUPER is the Super Companies that exploit your super and extract their fees and make crook investments so your super is worth less than what you have paid in by the time you can access it.

But the ever caring Scomo Govt is moving to clean up the SUPER scandals.

Wonder how the Industry Super companies that feed the unions will go ?


ASIC is toughening its approach to superannuation funds with new powers
Rod Myer 10:00pm, Dec 25, 2019 Updated: 10:32pm, Dec 25


ASIC chair James Shipton has new powers to keep super funds in line. Photo: AAP

Australia’s corporate watchdog is stepping up its oversight of superannuation in response to the banking royal commission.

ASIC superannuation executive leader Jane Eccleston announced the regulator will be closely monitoring super fund behaviour after numerous scandals were exposed by Royal Commissioner Kenneth Hayne’s inquiries.

The pledge comes as the federal government has released details of its plans to further boost the powers of regulators by obliging better co-operation between ASIC and the Australian Prudential Regulation Authority.

Along with demanding general co-operation, Treasurer Josh Frydenberg said the two regulators would be obliged to:

Share information to the maximum extent practicable; and
Notify the other whenever it forms the belief that a breach of the law for which the other regulator has enforcement responsibility has occurred.
The obligations were recommended by Commissioner Hayne.

Both regulators were found to be weak and too close to the industries they regulate, which in turn made them unwilling to take tough action.

Ms Eccleston said ASIC is toughening its approach.

“In an effort to deter any future trustee misconduct, we will take action against historical and present wrongdoing,” she said.

“This includes trustee behaviour that causes monetary loss to consumers, financial exclusion, loss of market integrity and confidence, and behaviour that undermines competition.”

Trustees on notice
ASIC, she said, is also putting trustees on notice for persistent underperformance and will use it as an indicator of potential criminal behaviour.

“While not illegal in itself, underperformance is often an indicator of misconduct and can coincide with breaches of the law, such as conflicts of interest, failure to act in members’ best interests, and lack of diligence by trustees,” Ms Eccleston said.

The four areas that are the main target of  ASIC’s attention are:

Advice in superannuation
Insurance in superannuation
Fees and cost disclosure
Taking action against misconduct by super trustees.
In early December, the regulator completed a market scan of advice services offered by super funds to their members to get a picture of how funds are functioning.

The scan is focused on “the different models of financial advice provided by 25 superannuation funds across the retail, corporate, public and industry sectors”, she said.

It found most of that advice was “generally appropriate”.

Costs matter
Clear and understandable information on fund costs and performance are also in the gun.

“In the spirit of members’ bests interests, trustees have an obligation to ensure that consumers receive transparent and useable information,” Ms Eccleston said.

That information should enable them to “understand fees and costs, compare products, and make confident and informed choices”.

“To this end, we are continuing our work on fee disclosure obligations across both superannuation products and managed investment schemes.”

Westpac case has helped
ASIC’s powers in the superannuation area received a boost late in the year when the full Federal Court found in its favour in a case against Westpac.

The case swung on the regulator taking the view that advice given to customers was personal advice – which requires advisers to consider consumers’ individual circumstances – and not the general advice they had provided.

“Westpac attempted, assiduously, to get the customer to make a decision to move funds,” the judge in the case found.

“Westpac took unfair advantage of that asymmetry by implementing a carefully crafted telephone campaign … The telephone campaign was directed to persons with whom Westpac had an existing relationship and in a real sense occupied a position of trust with respect to the customer’s superannuation fund,” the court found.

The case was significant as it was the first undertaken by ASIC after the Hayne commission and was a test of new powers delivered under the government’s response to the commission.

The court’s initial finding against ASIC was a blow to perceptions around these new powers, but the subsequent victory at appeal should give ASIC confidence to act on them further.

The New Daily is owned by Industry Super Holdings

https://thenewdaily.com.au/finance/superannuation/2019/12/25/asic-new-powers-super-funds/