The whole conversation around Super is way off beam.
Man, the government just doesn’t get super.
Actually, scrap that. People don’t get super.
So the government squeaked through a bunch of reforms to superannuation last week.
And look, on the face of it, they’re pretty good.
The key things for my money are one, the “stapling”. So the first industry fund you join gets ‘stapled’ to you. If you change jobs, you take your super with you.
At the moment, most people just open up another account with their employers preferred super fund, and as a result can end up with a bunch of super accounts.
(No, more accounts does not mean more super.)
So that’s not a bad thing.
The second thing is that they’re going to start publishing super fund results. The ATO is also going to name and shame underperforming super funds.
Superannuation funds will now face an annual performance test and public ranking by the Tax Office as part of the Your Future, Your Super package that passed Parliament on Thursday.
The Australian Financial Review has identified 23 default products across 21 different super funds that could soon face the ignominy of being publicly labelled an underperformer, according to data from APRA’s super fund heat map.
Any product that underperformed its six-year investment benchmark by more than 50 basis points in the APRA data is included in our list as a potential underperformer.
This is also a good thing.
The whole finance industry’s business model is built on laziness. It’s built on trusting that consumers find money too complex or too boring to spend time checking the details and bothering to do things like checking that they’re not getting ripped off.
(Who’s got time for that?)
Note that the governments first draft of the legislation didn’t include fees. So your super fund could be just hitting its benchmark, but charging you incredible fees, and still not get named and shamed.
So publishing under-performance is a good thing. It should encourage funds to hit their benchmarks – which I think is passive-investing in ETFs.
So the funds have to show that they’re adding at least some value.
(I know. How onerous!)
And consumes are probably better off as a result.
But we’re not getting to the root problem here.
And that’s responsibility.
The problem isn’t that super-funds are, 23 times out of 21, a rip-off. (Although that is a problem).
The problem is that we don’t teach people financial responsibility.
We shouldn’t have to tax-incentivise super. People should be so motivated to provide for themselves financially that they do it anyway.
And we shouldn’t have to publish a list of underperformers to prod people into getting the best returns on their investments. They should be hungry for it.
They should know what they need, they should have the literacy to be able to ask for what they need, and they should have the freedom to choose for themselves.
What’s needed is education.
So here’s my offer: give me the budget of a small department in the ATO, and I’ll educate the nation.
It’s not that hard. I did it and I failed school three times.
Give people the tools they need to take responsibility for themselves.
Everything else will take care of itself.