In its submission to the fifth round of royal commission hearings, Colonial First State Investments Limited (CFSIL) expressed its belief that a superannuation fund should be assessed by reference to whether the outcomes it provides members meet their expectations.
“An examination of investment returns as the sole measure of success is too simplistic,” the group said.
“Members will have varying needs and circumstances and many Choice members will consider trade-offs based on their individual preferences, risk tolerances and circumstances. For example, some members will be comfortable accepting higher investment costs or fees to access a particular investment option whilst others will prefer an investment allocation which prioritises capital stability, and therefore lower risk, rather than prioritising the potential for higher returns.”
CFSIL described superannuation investment performance as “a complex and multifactorial issue”, noting that APRA’s performance data is unreliable.
“APRA produces fund level performance data which aggregates the returns of all investment options within the fund into a weighted average. For a retail fund which potentially has hundreds of investment options (only one, or a very small number, of which will be MySuper options), this data point is effectively irrelevant to members. It is not a return that a single member could possibly receive. Both APRA and the Productivity Commission have provided warnings about relying on this data,” the group said.
“Unfortunately, performance data is often presented using fund or sectoral level comparisons which are both unhelpful and misleading to members when considering their own superannuation fund investment performance. Further, when more care is taken to attempt more accurate comparisons at product or option level, including the approach used by the Productivity Commission in its draft report, assumptions are often made which fail to acknowledge changes in product features or investment styles over time.”
The company’s stance on super investment performance being a “complex” issue comes as a new entrant looks to offer a simpler super solution for Australians.
This week superannuation expert Mercer and Australian e-commerce giant Kogan.com announced the launch of a new partnership for the launch of a new “no frills” super fund.
“Albert Einstein once said that ‘compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it’,” Kogan.com executive director David Shafer said.
“Every Australian should consider whether the power of compounding is working for them through low fees, or against them through the ongoing erosion of their wealth by high fees.”
