Retirement
Senator wants Future Fund to manage your superannuation
A Liberal backbencher has proposed that superannuation should be an opt-in system, with those who decide to invest in their superannuation having their funds transferred to the Future Fund, a discussion paper has revealed.
Senator wants Future Fund to manage your superannuation
NSW Liberal senator Andrew Bragg’s latest discussion paper has called for the Future Fund to become the default superannuation product for the nation’s workforce.
The Future Fund is an independently managed sovereign wealth fund established in 2006 to strengthen the Australian government’s long-term financial position.
As at 31 March 2021, it was valued at $178.6 billion.
The senator noted that since superannuation first came into effect almost three decades ago, it has failed to achieve its goal of reducing pressures on the federal budget by reducing pension costs.
Senator Bragg said it is for this reason that Australians should instead default into the Future Fund.
“The Future Fund provides high returns and lower costs for consumers, benefiting not only members of the fund but all Australians by creating a competitive benchmark for the entire sector,” Mr Bragg explained.
He also noted that the Future Fund provides greater returns for members.
Using data over the past decade, he said the Future Fund has an average return of 9.1 per cent, while data from Chant West shows compulsory super has grown by 8.1 per cent.
However, it is worth noting the Future Fund does not pay taxes and therefore has been criticised in the past as a comparison to the industry funds which have to pay taxes.
The minister also highlighted that not only can members get a better return, but fees could greatly be reduced if Australians put their super into one fund.
Using the examples of Sweden, New Zealand and the United Kingdom, Senator Bragg noted how each had lower fees due to the consolidation of wealth.
Mr Bragg argued “the major Swedish state-run pension funds all maintain management costs below 0.1 per cent of total assets”, with Australians paying more for their current option.
Under Senator Bragg’s proposal, new entrants to the workforce would be entered by default into the government-run fund, called Super Guarantee Australia (SGA), unless they opted to join a specific retail or industry fund.
Workers in underperforming superannuation funds would also have their retirement savings transferred into SGA.
“The super funds have had it far too easy for far too long. It’s essentially been a gravy train. With these reforms competitors would have to do better to attract customers to opt out of the default and opt into their fund,” Senator Bragg concluded.
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