T H E L E A D I N G I N D E P E N D E N T J O U R N A L FO R T H E S U P E R A N N U AT I O N A N D I N S T I T U T I O N A L F U N D S M A N A G E M E N T I N D U S T RY DECEMBER/JANUARY 2011 Volume 24 - Issue 11
MySuper returns less than super 3 SUPER OVERHAUL Unpaid SG obligations to haunt directors of failed companies
There is a danger that the low-cost nature of MySuper could be reflected in the returns it actually generates for members, according to a Super Review roundtable.
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11 EDITORIAL Is the Government heading in the wrong direction?
17 INSURANCE Print Post Approved PP255003/01111
Recent court ruling reshapes the TPI landscape
20 YEAR IN REVIEW Looking back with an eye on the future For the latest news, visit superreview.com.au MANDATES
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NEWS
he Federal Government’s pursuit of the implementation of the Cooper Review’s MySuper proposal carries with it the risk of financially disadvantaging those who can least afford it, according to the findings of a roundtable of senior executives and trustees working in the superannuation industry. A Super Review roundtable held at the beginning of the Association of Superannuation Funds of Australia (ASFA) conference in Adelaide endorsed warnings that the low-cost nature of the MySuper proposals carried with it the risk of lower returns. AustralianSuper manager Paul Schroder described lower returns as being one of “the smouldering risks” attached to the implementation of MySuper. “People are driven to forget about returns in pursuit of lower costs,” he said. “It’s perhaps ironic for the industry fund person to be talking about the value on the earning side, but there is a real risk in this whole story about lower costs,” Schroder said. “Everybody can get lower costs, you can seek scale and you can go passive, but will 3
EDITORIAL
Everybody can get lower costs, you can seek scale and you can go passive, but will that deliver the returns you need over a lifetime?
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ROUNDTABLE
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that deliver the returns you need over a lifetime?” he asked. Non Government Schools Super trustee John Quessy endorsed Schroder’s concerns and warned there was a danger that the lower returns generated by a low-cost MySuper might impact those who could least afford it. “Think about the person,” he said. “We take a picture of the person for whom MySuper in its simplified form might in fact be attractive. Somebody who is absolutely and totally disengaged; who will probably never consolidate any of their funds; who will never make extra or voluntary contributions; who will never switch investment options, will never be tempted to roll over – in fact, this is a person for whom trustees are clearly not an issue. “So let’s actually establish now a portfolio for that person who ignores any opportunity of illiquidity premium,” Quessy
YEAR IN REVIEW
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APPOINTMENTS
said. “How dumb; it’s just absolutely dumb.” He warned that trustee boards might be able to invest such a person’s money somewhere with the potential for higher returns, but would not be allowed to do so. “That has absolutely not been thought through,” Quessy said. However, Schroder pointed out that investment choice had also been an issue in circumstances where, during the global financial crisis, people had actually chosen to switch allocations at the wrong time. “If you look at the people who switched, they have basically switched out at the wrong time and switched back. So actually there’s an argument to say it’s people who followed the guidance of the trustees and leveraged the liquidity of the cash flows that actually, over time, do anyway,” he said. SR See pg 12 for roundtable. 23
EVENTS
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