Employees warned not to leave corporate funds
By Zoe Fielding
EMPLOYEES who leave wholesale corporate superannuation funds in favour of retail funds could be financially harmed and may end up paying fees double or triple those of their current funds, superannuation consultancy, The Heron Partnership, has warned.
The consultancy has released research that claimed most company funds charged combined administration and investment fees of between 1.2 and 0.65 per cent of members’ fund assets while retail funds charged average fees of 2 per cent or higher.
Heron Partnership managing director Chris Butler said larger employer organisations could also negotiate lower fees than smaller companies or individuals because they had better buying power.
For example, the research found a corporate fund with 250 members and $100 million assets would charge fees of around 1 per cent, while fees on a similar fund with 2,500 members and $200 million assets would be only 0.7 per cent. Retail fees on the same fund could be higher than 2 per cent, according to the research.
“The work we’ve done clearly shows that most people will be much better off — at least on a cost basis and therefore on an ultimate benefit basis — by continuing with their current employer’s default fund,” he said.
Butler said it was critical that employees understood the features of their current funds before deciding whether to change.
“Employers need to provide easy to understand information to their employees and part of this needs to be a warning about hasty decisions.”
He said employers would want to assist their employees as much as possible in the lead-up to choice.
“However, employers cannot step across that line between information and advice and as a consequence we anticipate an increase in the need to provide employees with workplace financial services and advice,” he said.
Despite the research findings, the battle to keep employers in corporate funds could be a losing one.
The Australian Prudential Regulation Authority has estimated that up to 600 funds are set to exit the industry.
Recommended for you
Shadow financial services minister, Luke Howarth, has stressed the Coalition’s commitment to reforming the CSLR, adding that he ultimately wants to “get rid of it”.
With just over three weeks until the federal election, the FAAA has put a reduction in red tape and further support for new entrants on its priority list for an incoming government.
The corporate regulator has issued infringement notices to three AFSLs whose financial advisers provided personal advice to a retail client while unregistered.
Rather than taking a controlling approach, the latest generation of overseas private equity deals is helping advice firms to achieve their growth ambitions, three commentators have said.
