SUPERANNUATION in Australia is divided into two distinct sectors: the increasingly popular self-managed super funds, and the professionally managed industry and commercial funds.
One of the reasons given for the popularity and increasing size of the SMSF sector is the level of control given to members. A common complaint levelled at industry and commercial funds has been: "Why would I pay someone else to lose my money?" This criticism often comes from a belief that the large super funds do not have enough connection with members.
Two events this week have provided evidence of this lack of connection. The first was the announcement that the construction union was looking to influence the board of Cbus, the construction industry superannuation fund, not to invest with a company the union was in dispute with.
The last thing a superannuation member intent on maximising their retirement investment savings wants to hear is that investment decisions are to be influenced by industrial relations disputes rather than good investment policy.
The second event related to a submission by the Association of Superannuation Funds of Australia, the industry body for the industry and commercial super sector, to the Australian Prudential Regulation Authority.
ASFA's submission was a complaint about increased reporting requirements that its members faced. At the heart of the complaint was that the superannuation industry was split into two categories.
Its members are regulated by APRA and SMSFs are regulated by the Australian Taxation Office.
ASFA felt it was unfair that, as the increased data to be collected by APRA was meant to inform government so that more efficient policymaking decisions can be made, SMSFs were not subject to the same increased data reporting requirements by the ATO.
This submission shows how far out of touch ASFA, and by association its super fund members, are with reality when it comes to superannuation. It also ignores one of the big differences between SMSFs and other superannuation funds. SMSF members are looking after their own money while the other superannuation funds are looking after other people's money.
Most of the reporting requirements imposed on APRA-regulated funds are there to ensure that members' interests are protected.
Much of the data collected by APRA is more about ensuring the large super funds are correctly administering the money they hold on behalf of members than being a source of data for governments
to make policy decisions on.
The submission by ASFA also ignores the reporting requirements placed on SMSFs by the ATO. The amount of information required by the ATO includes a breakdown of expenses of the fund into 14 categories, what contributions are being made and benefits paid out for each member, and information about investments made by the SMSF broken down into 19 different categories.
This information collected by the ATO is widely published and made available to the government. As a result of this, the government has more than enough information on what SMSFs are doing to base policy decisions on.
The ASFA submission highlights a weakness of the super industry. Despite SMSFs being the largest sector in the industry, it does not have a body to represent it to the same degree as industry and commercial funds do. If it did, many of the meaningless rules imposed on trustees, originally designed to protect members from the actions of trustees, would not still be in place.