By Jason Spits
COMPULSORY choice of funds in superannuation is not only a contradiction in terms but will also be defeated if investors chose to use a default fund, which is usually an industry fund under current law, according to Bridgeport Advisers and Asset Managers executive director Robert MC Brown.
Speaking at the group’s recent conference, Brown says choice of fund has been an obsession with the Government for some time based on an agenda of providing diversity in superannuation. He also says there is another agenda of curtailing the power of industry funds under award systems.
He says this power will remain as long as default funds remain industry funds under current superannuation law and “regardless of your opinion of industry funds will have delivered to them a major industry advantage”.
However he says superannuation across the board is beset by bigger issues, chief among them the heavy-handed tax of superannuation and the need for reform.
Brown says the introduction of various taxes across superannuation have had little benefit for the industry and “in its paranoia to get all the cheats, the Australian Taxation Office (ATO) has made the system more complex”.
Furthermore, he says, the taxes themselves take large amounts out of superannuation and the real area for simplification is tax reform.
“There are a number of times that superannuation is taxed when it should be solely at the end, but this will not happen because it is worth too much to the Government and is currently about $500 million a year,” Brown says.
“But the chance of removing tax on superannuation and reforming is the same as cows flying, so at least if they are not going to remove the taxes they should leave superannuation alone as the constant changing damages people’s savings.”
Despite the issues facing superannuation, Brown still remains confident that super will continue its upward climb and points to its growth from $38 billion in the mid 70s to $600 billion this year.
He says there have been problems with issues like returns and capital values, but the industry is constantly growing. However, as part of this growth, there will be winners and losers.
For the winners, he points to master trusts, wrap accounts and do-it-yourself superannuation funds, while the losers will be industry funds because of their lack of distribution and low account balances, despite high member numbers.
