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PC proposal could sideline retail defaults

Retail default super products could be left out in the cold if the Productivity Commission’s recommendation to focus on net returns is adopted, says SuperRatings.


Last week's Productivity Commission draft report Superannuation: Alternative Default Models may be good news for retail funds after all, according to SuperRatings.

The report recommended that the key criteria for assessment and inclusion as a default fund should be a focus on net returns.

However, SuperRatings net benefit modelling suggests that such an approach (as opposed to total returns) would still see not-for-profit funds come out on top.

The SuperRatings modelling, which measures a fund's net returns after the deduction of all fees and taxes over a 10-year period, found that the top 10 default funds, in alphabetical order, would be: AustralianSuper, BUSSQ, CareSuper, Catholic Super, Cbus, Hostplus, QSuper, Rest Industry Super, Telstra Super and UniSuper.

SuperRatings chief executive Adam Gee said that while he supports the Productivity Commissions "broader intentions", limiting the default list to only 10 funds could sound the "death knell" for some "outstanding value-for-money funds".

When it comes to assessing the value of a super fund, a broader assessment of quality than just returns should be used to select default funds, said SuperRatings.

"This must include an assessment of a range of underlying metrics in respect of investments, fees, insurance, member servicing/advice, administration and governance, to ensure that every facet of a superannuation fund’s offering can be appropriately interrogated," said a statement by the firm.

"Whilst SuperRatings believes there is already a reasonable level of competition evident in most sectors of the superannuation marketplace, it also recognises that any changes that introduce greater competition into the market and provide members with better retirement outcomes can only be positive."

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