Sent: 20-01-2009 11:42:01
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Compulsory super is a train wreck in the making
My best wishes for the New Year.
The title of this week's column is the title of an article which appeared in yesterday's Australian authored by Professor Bagaric from Deakin University's Law School.
You can view the article at: http://www.atcbiz.com.au/r.php?r=bt3cjn7
Reader feed-back on the article can be read at: http://www.atcbiz.com.au/r.php?r=ynknkhn
As one might gather from the title, Professor Bagaric is not particularly enamoured with superannuation or the people who run it. For example, financial advisers are called "deluded".
Many of Professor Bagaric's problems with the superannuation industry can be dealt with by investor's actively exercising their right to choose their own super fund in much the same way they choose all their other investments.
At present there are very different perceptions about choice of fund from two pieces of research. More on this in a forthcoming article.
If investor's have lost faith in fund managers and their ability to provide value for money (as Bagaric claims) then the super system has an important outlet valve - namely, small super funds where the trustees get to manage the money themselves and don't have to rely on fund managers who have done "nothing to earn our confidence or substantiate our trust" as the Professor claims.
Professor Bagaric's major point is that it isn't necessary because the concept of full-time retirement is not sensible behaviour. He might be right but I suspect many workers are looking forward to the day they no longer have to trudge into a boring job which comes with irritating colleagues or clients.
There are two issues which are important. The super industry is encouraging an increase in the compulsory contribution rates. Whilst this might be a logical response to recent market volatility, I suspect that many superannuants will be reluctant to plough more money into a loss making venture.
Which brings us to the other issue. According to government modeling superannuation is not expected to save much in the way of age pension outlays and does not appear, yet, to solve the expected aged and health care funding crises. It is surprising that no one seems to talk about working towards a viable solution in relation to these two problems which are predicted to create even bigger black holes than the age pension.
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