PC report proposals tipped to benefit industry funds most
The Productivity Commission’s proposal to base default options for workers on the top 10 performing super funds will benefit industry funds more than retail funds based on performance and satisfaction, according to Roy Morgan Research.
In its final report on superannuation, the Productivity Commission recommended using the 10 best-performing retail and industry funds as the default options for new workers.
Based on the performance tables and satisfaction ratings of industry super funds versus retail super funds, Roy Morgan Research said it expects that this proposal by the Productivity Commission will benefit industry funds over retail funds.
The results from the latest Roy Morgan Single Source Survey conducted in the six months to November 2018 indicated that eight of the top 10 performing funds based on satisfaction with financial performance were industry funds.
The highest satisfaction was for Catholic Super at 70.5 per cent, followed by UniSuper at 69.7 per cent.
The only retail funds to make it into the top 10 were ASGARD with a satisfaction rating of 65.1 per cent and Macquarie with 63.7 per cent satisfaction, but both were below the average of 65.5 per cent for the top 10.
The survey results also showed that the five major retail superannuation funds have an average satisfaction of 54.7 per cent, compared to the total retail fund average of 57.2 per cent and well below the industry fund average of 61.8 per cent.
“The best performer among the majors was Colonial First State with 60.7 per cent, well ahead of second placed BT at 55.6 per cent,” Roy Morgan said.
“The lowest satisfaction among these majors was for AMP with 50.4 per cent, and it was in fact the lowest of all the funds reported on in the superannuation satisfaction report.”
In the six months to November 2018, the average satisfaction for industry funds was 61.8 per cent, an increase of 2.6 per cent points from the same period 12 months ago at 59.2 per cent. Over the same period, retail funds declined by 0.3 of a percentage point from 57.5 per cent in 2017 to 57.2 per cent in 2018.
Roy Morgan industry commentator Norman Morris said that the proposal by the Productivity Commission to produce a list of the top-performing superannuation funds in order to improve on the current default system faces a number of issues.
“An important consideration in determining which funds will be included in the top 10 is that with market fluctuations they are subject to regular changes or re-ranking,” Mr Morris noted.
“This means that consumers may choose the top fund one day, only to have it slide down the ranking. We have seen this happen with our satisfaction ratings, where only three funds out of the top 10 have remained in this group for the last three years.”
As superannuation is a very long-term process, Mr Morris said that it is likely that over a number of decades there will be a large number of ranking changes.
“This is likely to cause uncertainty and confusion in member choice in an industry that already lacks member engagement. It is more likely that members want a simplified system rather than one subject to continuous change and decision making,” he said.
