The group executive of MLC has raised concerns over the rapid take-up of self-managed superannuation funds in Australia suggesting the expansion of the sector is based on “fashion over fact”.
In his address to the Centre for Economic Development 2011 superannuation industry update last Wednesday, Steve Tucker questioned the understanding of certain SMSF investors.
“I am concerned with the rapid take-up of these funds when they are only appropriate for a small segment of the market,” he said.
“I worry that the explosion of SMSFs is about fashion over fact – everyone wants one but most people don’t understand what is involved in running one or have sufficient funds to even justify one.”
Another concern for Tucker is that SMSFs may have become popular due to the growing lack of trust in Australia’s broader superannuation system.
He also said the squabbling between retail funds and industry funds has not helped the issue.
“Whilst industry funds are a relevant and viable option for many Australians, their contribution to the super debate has, at times, been unhelpful and divisive and serves to undermine trust in a system which is largely operating well,” he said.
“The reality is MLC, and a number of other retail funds, offer superannuation options which are as cheap, if not cheaper than industry funds.”
However he said with the government’s industry reforms, in particular the removal of commissions, introduction of opt-in and a best interest duty, would create a level playing field for both industries.
“The time has come to compete on substance rather than rhetoric and assess superannuation funds on product features, performance, pricing and service, and recognise the value of advice,” he said.
“In this context of competition and innovation, I also don’t believe that superannuation funds should be specifically named in modern awards.”
He said it was time to call a “truce and start working together” to achieve a common goal of placing Australians retirement needs first and support the government’s push for an increase in superannuation guarantee from nine to 12 per cent.
