by Alan Thornhill
Roughly half of all Australian workers will be poorer in retirement than they should be because they have simply lost at least some of their superannuation.
That happens, mostly, when they change jobs.
The total amounts involved are huge.Â The Superannuation Minister, Nick Sherry, told an industry conference in Brisbane yesterday, thatÂ $11.9 billion is now stored in lost superannuation accounts.
And he said these losses keeps growing.
Senator Sherry admitted that he is worried about this trend.
And he has suggested at least a partial solution.
“I have expressed a preference for the option of reuniting Australians with their lost accounts by introducing an automatic consolidation system,” he said.
Senator Sherry said this would includeÂ an opt out provision, based onÂ Tax File Numbers.
“Under this option, lost accounts would be automatically rolled over into a current or the most recently active account.”
Senator Sherry said that current records show that there are 6.1 million lost superannuation accounts.
“An issue I have been following with concern for some time is the continued growth in the amount of superannuation reported on the Lost Members Register,” he said.
“The Register, which uses information supplied by superannuation funds, is intended to assist individual members to identify lost super and consolidate their accounts,” Senator Sherry said.
He said the money in accounts on the register is still held by the funds on behalf of the lost members.
Senator Sherry said thatÂ the number of lost accounts and the amount in them are both
“I do note, however, the definition of ‘lost member’ is drawn very widely to ensure that any account which may be ‘lost’ is reported to the register,” he said.
“Nevertheless, the growing amount of superannuation identified as lost superannuation has been a significant issue over the last decade.
“Lost accounts represent approximately one in five of all superannuation accounts, ” Senator Sherry said.
On average there isÂ one lost account for every two Australian workers,” he added.
“This is a problem because the sizeable number of these accounts suggests many Australian workers will access less of their savings on retirement than they would otherwise receive.
“In addition, the number of these accounts collectively increases superannuation fund running costs.
“Previous attempts to address this issue in the system have failed,” Senator Sherry said.
by Alan Thornhill
The Federal government has named members of its new Superannuation Advisory Group.
The Superannuation Minister, Nick Sherry, who will chair the group, said superannuation is central to the government’s approach to retirement incomes.
The people named are generally well known in the industry.
Jo-Ann Bloch of the Financial Planning Association
Marilyn Clark-Murphy, of Edith Cowan University
Richard Gilbert of the Investment and Financial Services Association
John Maroney of the Institute of Actuaries
Terry McCredden of Telstra Super
John Piggott from the University of NSW
Andrea Slattery of the Self Managed Super Funds Professionals’ Association
Pauline Vamos of the Association of Superannuation Funds
Rosemary Vilgan of QSuper and
Garry Weaven of Industry Funds Management.
by Alan Thornhill
Australians put an extra $121 billion into their superannuation pots last year.
That’s a very healthy rise of 17.9 per cent.
The Statistician is now reporting that the total amount Australians have invested in superannuation is a staggering $802.4 billion.
Australia’s superannuation funds, in turn, are now major property owners. Their assets include golf courses, city buildings and fabulous tourist resorts.
Some of their assets, though, are starting to attract attention, for the wrong reasons.
The fund managers for one of the really big funds, Comsuper, were forced to confess, effectively, that they may well have more than $1 billion tied up in hedge funds.
And hedge funds are looking much less healthy now than they were a year or so back, when those investments were made.
This was reported – exclusively – in Private Briefing.
We can expect not only Federal public servants, but the nation’s serving soldiers, sailors and Air Force personnel to start asking some very tough questions, when the newspapers, television stations and radio finally catch up with that story.
If they ever do.
The main fund manager’s defence, at the Senate committee, which extracted the confession, was interesting.
It was, basically, that all fund managers had been doing the same thing.
With amounts liike $802.4 billion at stake, fund managers everywhere can expect some very sharp questions from their members, if things don’t improve rapidly, for the hedge funds.
At present, though, the immediate prospects for hedge funds don’t lookÂ good.
by Alan Thornhill
Tougher times, like those we are facing now, do one thing well.
That is exposing mistakes made in the better times.
Possible mismatches, for example, between investments and investment objectives.
That issue arose starkly, before a Senate committee hearing in Canberra this week.
An investment manager was asked to explain why his fund had lent perhaps $1 billion or more worth of blue chip stocks to hedge funds.
The unfortunate man, Peter Carrigy-Ryan probably may well have been reminded of a tough headline, from last Saturday’s Australian newspaper, as he faced his inquisitors.
That headline – Traders plunder super – ran with a story sharply questioning the placement of blue chip stocks, purchased with superannuation funds – with hedge operations, whose possible shortcomings have been thrown into sharp relief. That, of course, has been a direct result of current volatility in world financial markets.
A Tasmanian Liberal Senator, John Watson, who is an acknowledged expert on superannuation, led the questioning.
Senator Watson said he accepted that the placement had been made for “commercial gain.”
That is, of course, what fund managers, like Mr Carrigy-Ryan, a senior executing of the Australian Reward Investment Alliance, are paid to do.
That, rather obscure, government agency, invests the money that Australia’s Federal public servants and military personnel put into their superannuation funds. It has some 325,00 members.
And fund managers, like Mr Carrigy-Ryan, could – quite properly – be condemned for not investing, when the right opportunities arose.
There would be opportunity costs for fund members, if they held back like that.
But a basic question remains.
Is it right to lend long term assets, like superannuation money,to aggressive operations, like hedge funds, that exist only to make big, short term profits? Especially when those funds operate with high degrees of risk, at times.
Mr Carrigy-Ryan resorted, at one point, to the “everyone does it” defence.
“I think you would find that most custodians in the Australian market would lend scrip for a whole range of reasons, and those reasons could include…”
Clearly not satisfied, with the drift of this reply, Senator Watson cut in with another tough question.
“Including short selling?” he asked.
“They could include that,” Mr Carrigy-Ryan replied.
“They could include a settlement delay, for whatever reason that happens in the market.
“There could be a whole range of reasons.”
Mr Carrigy-Ryan, who was clearly not comfortable, offered to get more details for Senator Watson.
But Superannuation Minister, Nick Sherry, who represented the government at the hearing, said it might not be possible to disclose them, because they could involve commercial confidence.
Senator Watson said he would, grudgingly accept that, if he had to, to get the figure, but he let everyone know that he was not happy about that.
“I would like to be sure that I am going to get a figure,” he said.
“It has been hidden under a masquerade of in confidence,” he growled.
Senator Watson is still waiting for his detailed figure.
But his criticism of the secrecy, in which this investment has been made, goes right to the heart of the matter.
If fund members had known that such investments were being made, and told of the reasons for them, they might have accepted the practice, as part of a normal commercial operation.
But sudden exposure, of what can be seen as secret practices, indulged in by people suffering from a masters of the universe syndrome, might well prove to be a different matter, altogether.Â Fund members might get very angry, indeed.
Weathercoast by Alan Thornhill
A novel on the murder of seven young Anglican Christian Brothers in the Solomon Islands.
Available now on the iTunes store.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
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