The architects of the MySuper regime have admitted they missed a trick by failing to mandate passive indexed strategies in default funds, says Grattan Institute chief executive John Daley.
Mr Daley was the keynote speaker at recent Bravura roundtable of senior superannuation and financial services industry representatives.
He cited the recent Grattan Institute report Super Sting, which showed member fees "ought to be substantially lower than they are".
"A substantial chunk of the population is paying almost two per cent, and that is high," he said. "One claim is that those fees pay for secure, active performance. Not really."
"One of the nice pieces of analysis in Grattan’s Super Sting report was to apply the decision rule every year of simply picking the cheapest fund from the previous year, rather than the best performing fund. You end up a long way in front over 10 years," said Mr Daley.
Cbus Super general manager for product and business insights Sean Leonard questioned the approach to active management in default funds.
"Why did ‘MySuper’ not mandate passive indexed as the strategy for all default funders?" asked Mr Leonard.
"If this argument is bought widely and if Treasury buy it, then surely a government response to take out a large strip of the cost, is to run passive indexed, get it down to four, five, six basis points instead of 50 and 60 for the investment component," he said.
Mr Daley revealed he had asked the 'architects' of the MySuper regime the same question.
"The response from them has been: 'With the glorious wisdom of hindsight, we missed an opportunity'," he said.
The effect of active management on default fund fees is a subject of discussion in the interim report of the Financial System Inquiry, which is due to hand down its final report in November this year.
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