The release of the Productivity Commission’s Draft Report Superannuation: Alternative Default Models has certainly raised some conjecture across the superannuation industry. The Report’s recommendations warrant a serious assessment given their potential ramifications for what remains a burgeoning superannuation industry, with a substantial number of funds still co-existing, despite ongoing pressures for consolidation.
SuperRatings notes that the over-arching criteria for assessment and inclusion as a default fund proposed by the Productivity Commission is a focus on net-returns, which SuperRatings has been advocating for many years, via its net benefit modelling. This measures a fund’s net returns after the deduction of all fees and taxes over a 10-year period.
Given the findings closely align to SuperRatings’ existing net benefit modelling, we have analysed the funds that would be likely to sit within the ‘List of 10’ default funds, assuming a key focus on net returns, under the Productivity Commission’s proposed multi-criteria tender model. These funds are, in alphabetical order:
- AustralianSuper
- BUSSQ
- CareSuper
- Catholic Super
- Cbus Super
- HOSTPLUS
- QSuper
- Rest Industry Super
- Telstra Super
- UniSuper
Based upon SuperRatings net benefit modelling, the above funds have the highest net investment returns over a 10-year period and hence, would be included based on a pure net investment performance measure.
As can be seen from the above table, each of the top performing funds on a net return basis is a Not-for-Profit fund, suggesting that the Retail Fund sector may continue to struggle to be named as defaults, unless a broader assessment of measures is utilised.
SuperRatings CEO, Adam Gee, commented “Whilst we remain supportive of the Productivity Commission’s broader intentions, limiting a default list to only 10 funds will result in some outstanding value for money funds missing out on default fund status, which may sound the death knell for many of these, despite delivering excellent outcomes for their members”.
