Count yourself lucky you missed a talk I gave on super on Friday, somewhat improbably at the Gaelic Club, but you're not getting off that lightly. Here's the gist of what I said, or at least the sober version of it. The topic was Superannuation — How Safe Is It? Are Regulatory Safeguards Sufficient?
The answer is it's about as safe as you can get. I'm talking about the big fund you or your boss uses; the rules and their supervision make it well nigh impossible for somebody to run off with your money.
If it happened, the government would be so embarrassed you'd be compensated anyway. But because every regulation eventually begets another, some rules are bloody-minded or plain barking mad.
One recent case made possible by one of the pettier regulations on DIY super funds was uncovered by BusinessDay. We called him the artful dodger because he convinced DIY funds to invest in art that he would look after and, of course, stole. How could they have been so gullible? Because they had to be.
Under the rules, artwork held by a super fund can't be displayed or enjoyed in any way. It has to be stored elsewhere, preferably where nobody will ever see it.
Oddly enough, for such a regulated industry, there are surprising gaps.
Although super funds must be governed by a trustee company, there aren't any rules about who the trustees can be, how many, or what they're paid. Their accountability is to the Australian Prudential Regulation Authority, which demands an account every October 31.
Still, unlike directors, it's rare to hear of a crooked trustee. Cases of fraud are surprisingly few, despite $1.1 trillion in managed super funds. Trio Super was one. The trustee dispatched money to hedge funds based in the Caribbean controlled by an American lawyer. Say no more. Those funds disappeared.
Needless to say, the regulators didn't know. Another example is CBA, where a now sacked adviser forged clients' signatures while others gave dud advice or didn't listen to clients to get more fees.
Guess you've heard of Storm Financial. This wasn't fraud but incompetence and greed. It became the poster child for the ban on financial commissions yet half its clients had opted for paying a fee instead. The real problem was excessive borrowing by margin loans just before a downturn. So where were all those regulations when they were needed? They were there, just not enforced.
And we can be our own worst enemies. So much hangs on the investment option you choose, especially as you near retirement.
Remember the GFC wiped out some $150 billion in super and forced many to postpone their retirement. They had too much in shares and not enough in cash, or rather, annuities that guarantee an income.
The Rudd-Gillard-Rudd government dropped the tax discrimination against deferred lifetime annuities, which guarantee an income beyond a certain age, in the last budget. Or at least said it would. Trouble is of the 96 budget initiatives of Wayne Swan or Peter Costello where nothing then happened, Treasurer Joe Hockey put this among the "further consultation required" category. The more things change ...
Read David Potts in Weekend Money, with
The Sunday Age every Sunday.
Twitter: @moneypotts .