Sent: 04-08-2009 09:49:01
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How big a threat are SMSFs under?
Writing in The Weekend Australian of 1-2 August last John Durie talked about the Super System Review also known as the Cooper Review.
"He [Review Chairman, Jeremy Cooper] has had a high profile since the appointment, doing a round of media interviews and luncheons with Merrill Lynch and others, which has the industry worried.
"The concern is he has made up his mind and will now set about proving his point.
"To an extent that concern is correct, but not in the way suspected by the industry.
"He is working from the position of an investor, with particular focus on the self-managed fund sector, which accounts for one third of the industry.
"The study will result in a series of papers running into Christmas and will hold public hearings early next year.
"His aim is not so much to bring out one final report but several, all aimed at opening the industry to competition."
"The Cooper review is aimed at what the industry charges for its work and will ask what value it provides for that money.
"That won't please the industry, nor will the obvious benefits for so-called passive funds.
"It will seek ways to improve comparison of funds and investment choices, which should provide a better platform for competition.
"It's early days yet, but at the very least there is obvious merit in having someone of Cooper's standing asking the right questions, even if his answers are not the right ones."
Interestingly the terms of reference for the review say that its job is to "comprehensively examine and analyse the governance, efficiency, structure and operation of Australia's superannuation system" ... including systemically analyse "all superannuation fund sectors".
Presumably the focus on SMSFs is only the first part of the super system that the Committee intend to focus on before moving onto the other areas of concern.
As I have mentioned previously here, concerns about the Cooper Review sticking it to SMSFs are most likely "a little overstated for two reasons. Firstly only a short-sighted drongo would think they could deliver blatant booterism in a government committee report, think no one would notice and expect to succeed. (Even Humphrey Appleby's classic presentation of three policy options, two of which are absurd, wouldn't work." Further his use of old statistics to justify his recommendations would also fail.)
"Secondly, and perhaps more importantly, Self Managed Funds are now too large a market to be treated brutally by government. Some people will only have a vague memory of the various changes made to SMSFs over the years and the furore that respective Ministers had to deal with as a result. 1998 and 2004 are two classic examples.
"Only a masochist Minister would fail to learn anything from these experiences."
It is true that SMSFs don't appear to be a natural constituency of the current government. But the statistics I quoted last week demonstrate clearly that lower income earners and younger people are moving into SMSFs.
Finally not all committee recommendations are adopted by Government. In fact I wouldn't be surprised if most committee recommendations are quietly forgotten about.
That said freedom does not come without constant vigorous effort and vigilance.
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