Super system strong despite “misleading analysis” saying otherwise

Australian superannuation funds are delivering the third best retirement savings system in the world, with the Association of Superannuation Funds of Australia (ASFA) warning that it is only “misleading analysis [leading] to sensationalist newspaper headlines” that suggest otherwise.

ASFA said that such headlines “only served to alarm Australians and detrimentally impact retirement outcomes”, saying that according to the 2017 Melbourne Mercer Global Pension Index only the Netherlands and Denmark have better systems.

“It is important to compare like with like when making fee comparisons,” ASFA said.

“For example, investing in government bonds may come with a lower fee, but Australian super funds achieve high returns from unlisted infrastructure, property and other investments and these cannot be obtained by investing in indexed funds.”

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The group also said that fees for managing Australian super funds were comparable to those in other countries with high levels of investments in equities, pointing out since the introduction of MySuper and other reforms fees had fallen.

ASFA also emphasised that:

• Over five years to the end of 2017, Australian super funds had the highest average investment returns in the OECD;
• Over the past twenty years, funds delivered 6.7 per cent returns, 4.1 per cent higher than the rate of inflation over the same period, after fees; and
• While countries such as Greece, Spain and Italy had high replacement rates of income in retirement, this was not sustainable. Australia’s flat rate and means-tested pension meant that its low replacement rates were sustainable.

“Superannuation is working … it is important to get the facts straight, because not doing so simply reduces confidence in the system, disengages the community and leads to worse outcomes in retirement,” ASFA said.