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Industry Super Network fund performance research flawed, says Financial Services Council
The Financial Services Council (FSC) has dismissed recent Industry Super Network (ISN) research comparing the performance of different superannuation sectors, claiming it is based on "misleading data".
The ISN research, conducted in-house by ISN chief economist Dr Sacha Vidler, is based on published Australian Prudential Regulation Authority (APRA) data and compares the profit and not-for-profit superannuation sectors over 14 years.
According to the research, the aggregate internal rate of return to investors in not-for-profit funds was 2.1-3.2 per cent higher than retail funds. When it came to the average returns over the past 14 years, industry funds clocked in at 5.35 per cent per annum, while retail funds returned 3.66 per cent per annum, according to the research. The ISN also noted that the average cash rate of return over the 14-year period was 4.23 per cent per annum.
"It is extraordinary that the practices of major retail super funds over a long period of time have reduced the average returns of their members to the point where their super would be better invested in the bank," said ISN chief executive David Whiteley.
However, the FSC was highly critical of the ISN research. FSC chief executive John Brogden pointed to the fact APRA data is intended for prudential purposes - not consumers.
"The data reflects funds as a whole rather than the individual investment option - balanced, growth, defensive - that a person is invested in," Brogden said.
The APRA data lumps low-risk options in with high-risk options, skewing the results, Brogden said.
Another factor that is not considered by the ISN research is the higher number of older Australians who are members of retail funds, and have a higher percentage of low-risk assets.
"A conservative allocation designed for an older member base will generally produce a lower return than an investment which is comprised of mostly growth assets. Retail funds have a large number of members in pension phase or nearing retirement," Brogden said.
The FSC said the soon-to-be-released APRA league tables would allow consumers to easily compare MySuper funds, as opposed to the ISN's use of "meaningless" whole-of-fund numbers, Brogden said.
"The FSC supports the accurate publication of superannuation statistics to help consumers select and compare their fund," Brogden added.
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