APRA debunks super switching mythology
Just because a superannuation fund member is switching from an industry fund to a retail fund does not mean they are going to be worse off, according to the Australian Prudential Regulation Authority (APRA).
APRA member, Helen Rowell, has told a Parliament committee that average retail fund performance and average industry fund performance were not indicative of the performance of individual funds.
"We have done some analysis showing that there are actually a reasonable number of retail funds and industry funds in the top quartile of returns, over 10 years, and in the lowest quartile of fees, over 10 years," she said.
"So, just saying that a member switches from an industry fund to a retail fund or vice versa does not necessarily mean that they are disadvantaged."
Dealing with questioning from Labor's Pat Conroy around allegations that banks were guilty of inappropriately switching clients to bank-owned funds, Rowell said it was clear and important that any potential conflicts are well managed and well-governed.
"Our focus with institutions and our dialogue with superannuation funds and the boards of those superannuation funds is to ensure that they understand and are aware of the mechanisms that are being used to distribute their products and the incentives that are in place around that and that appropriate controls and disciplines are being applied," she said.
"We did a little review of this a year or two ago, when it was suggested that there might be breaches of the inducements provisions in the SI(S) Act around the moving of funds at the employer level. Our sense, at that time, from the institutions that we looked at and the frameworks that they have in place around how they manage that is that there were not any breaches."
Rowell said that, notwithstanding this finding, APRA believed there was probably room to improve industry practices "and there is certainly room to improve some of the legislative provisions around inducements in particular".
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