Superannuation, the ultimate government cash cow?

[Value Collector]

1. Obviously costs would've increased, as the cost of all things do, over time. It's called inflation, I'm sure you've heard of it. But that was hardly the point of the article. I would also imagine that any costs associated with the merger would've been accounted for in their costings and pricing. Adding on fees for admin overhead is an operational expense. Adding on the costs to current fees would unlikely be rewound once mergers have completed. People would already be accustomed to them, so why would they roll them back? The article doesn't go into that depth, but cynicism towards a large and powerful group that raises costs with no inccentive for them to fall is hardly misplaced cynicism.

2. Good point. They don't elaborate. But again, they would have had costings and pricings done prior to the merge and outlined in detail for their execs/board. If those were one offs due to the merger, then they could easily point to that and say so. In fact, the article points to the opposite. The promise was that the merger of large funds would reduce costs, not 'there will be a momentary increase in fees to ensure transition during the merger'. Instead, a reduction of costs was promised, and the opposite happened.

And you're right from the individual account holder, but to what degree do you expect everyone who has a super to be so attuned? Those of us here certainly are, but to expect an entire population to be, is crazy. And don't be cynical? You're kidding right. They almost have a monopology and are going to be some of the largest pools of money in the country. Just ignore what they're doing? It doens't effect me personally, but that doesn't mean you shouldn't be cynical and cautious of what they're going to do to others. You're point seems to be more 'I got mine, and the rest should be better'.

Both ART and Australian Super are owned by their members, they have no shareholders to send dividends too, so I believe the interested costs are genuine real costs that get passed along.

Yes I have heard of inflation, 18% over 4 years is not that much more than inflation.

The author of the article mainly Seems to be upset by the fact that costs didn’t decrease, but as I was trying to point out, that its relative costs that matter when deciding in a merger was good or bad.

 

[Knobby22]

My fees with Australian Super were last financial year $300 on a reasonably substantial amount with returns of 10.48% in high growth and 8.22% for balanced which are the two options selected.

Also paid $549 for death cover, total and permanent disabled cover and income protection of $3,000 a month if something happens.
That's $45 per month which would cost a lot more if I got is separately.

Looks a pretty good deal to me. Why would you go with a for profit fund?

 

[qldfrog]

My fees with Australian Super were last financial year $300 on a reasonably substantial amount with returns of 10.48% in high growth and 8.22% for balanced which are the two options selected.

Also paid $549 for death cover, total and permanent disabled cover and income protection of $3,000 a month if something happens.
That's $45 per month which would cost a lot more if I got is separately.

Looks a pretty good deal to me. Why would you go with a for profit fund?

The reason I switched from ART to AS..so far so good

 

[qldfrog]

From woke 2.0 Canada :

https://www.mining.com/feds-must-force-pensions-to-fund-canadian-mining-lassonde-giustra-say/

And soon coming out our way..for let's say developing an Australian battery industry nudge to @sptrawler

 

[Ferret]

And soon coming out our way..

And maybe sooner than we think.

From today's SMH

Super funds stump up to get more people into homes​

Josh Gordon

HOUSING AFFORDABILITY
Hundreds of millions of dollars of retirement savings will be thrown at the housing affordability crisis under a deal struck between industry superannuation funds to boost the supply of low-cost homes.
In a landmark agreement, four of the nation’s biggest industry super funds, along with industry super fund-owned IFM Investors, have agreed to lend their members’ money to community housing providers wanting to build social and affordable housing using the federal government’s Housing Australia Future Fund.
The five entities – Cbus Super, CareSuper, Hostplus, Rest and IFM – have announced plans to provide long-term debt to pay for low-cost housing ‘‘at scale’’, after concluding they will now be able to generate a strong enough rate of return for their members.
It remains unclear how much the five entities, which collectively manage about $505 billion, are planning to lend or the rate of return they are expecting.
Rest chief investment officer Andrew Lill said housing affordability represented a huge challenge, but tackling it could significantly improve the financial security of members from the retail sector.
‘‘We represent around 1.25 million members aged under 35, and we know housing affordability is a driver of financial stress for many of them,’’ Lill said. ‘‘We’re excited about the potential of this partnership and the impact it could have on our members’ lives.’’
The idea of retirement savings being used for subsidised housing has been talked about for decades but has failed to gain much traction, partly because superannuation funds face strict financial obligations to provide commercial returns for their members.
Although superannuation funds have typically been prepared to invest in public infrastructure such as road, rail and port projects, until now there has been little direct investment in social housing or even lower-cost rental housing.
Under the fund announced last year, the federal government will initially borrow $10 billion to invest, generating an estimated annual return of $500 million, which
will in turn be used to subsidise housing development.
As part of the superannuation funds’ plan, community housing organisations will borrow from them and other institutional investors as part of a push to build 40,000 units over five years, backed by federal subsidies providing annual subsidies for 25 years from the fund.
Professor Hal Pawson, associate director at UNSW’s City Futures Research Centre, has estimated a rough government subsidy of $417,000 per dwelling.
The existence of the subsidy appears to be enough to give the superannuation industry confidence that it can generate strong enough returns to meet strict financial obligations to their members.
The annual subsidy payments, along with rental income from tenants, will let housing providers meet financial payments to the big funds, as well as ongoing costs such as maintenance.
The move follows decades of neglect for social and affordable housing, particularly in Victoria.
Last year, former Commonwealth Bank chief executive and Future Fund board of guardians chairman David Murray told The Australian Financial Review that retirement savings should not be used for affordable housing.
‘‘Appropriating superannuation fund members’ money to that purpose is not the solution,’’ he said.

 

[Knobby22]

From woke 2.0 Canada :

https://www.mining.com/feds-must-force-pensions-to-fund-canadian-mining-lassonde-giustra-say/

And soon coming out our way..for let's say developing an Australian battery industry nudge to @sptrawler

Fascinating article. Really interesting.

I find it funny that we, Australia, have taken over some of their mining giants and they have little left.

"Canada should consider Australia’s example, Lassonde and Giustra said. Its pensions, which are called superannuation funds, hold A$3.5 trillion (C$3.1 trillion), the third-largest amount behind the US and the UK. Domestic equities make up 21.9% of their assets. The large stakes prevent foreign takeovers, the entrepreneurs argued."

The reason for that is franking credits. Not because a law was passed.

 

[qldfrog]

And maybe sooner than we think.

From today's SMH

Super funds stump up to get more people into homes​

Josh Gordon

HOUSING AFFORDABILITY
Hundreds of millions of dollars of retirement savings will be thrown at the housing affordability crisis under a deal struck between industry superannuation funds to boost the supply of low-cost homes.
In a landmark agreement, four of the nation’s biggest industry super funds, along with industry super fund-owned IFM Investors, have agreed to lend their members’ money to community housing providers wanting to build social and affordable housing using the federal government’s Housing Australia Future Fund.
The five entities – Cbus Super, CareSuper, Hostplus, Rest and IFM – have announced plans to provide long-term debt to pay for low-cost housing ‘‘at scale’’, after concluding they will now be able to generate a strong enough rate of return for their members.
It remains unclear how much the five entities, which collectively manage about $505 billion, are planning to lend or the rate of return they are expecting.
Rest chief investment officer Andrew Lill said housing affordability represented a huge challenge, but tackling it could significantly improve the financial security of members from the retail sector.
‘‘We represent around 1.25 million members aged under 35, and we know housing affordability is a driver of financial stress for many of them,’’ Lill said. ‘‘We’re excited about the potential of this partnership and the impact it could have on our members’ lives.’’
The idea of retirement savings being used for subsidised housing has been talked about for decades but has failed to gain much traction, partly because superannuation funds face strict financial obligations to provide commercial returns for their members.
Although superannuation funds have typically been prepared to invest in public infrastructure such as road, rail and port projects, until now there has been little direct investment in social housing or even lower-cost rental housing.
Under the fund announced last year, the federal government will initially borrow $10 billion to invest, generating an estimated annual return of $500 million, which
will in turn be used to subsidise housing development.
As part of the superannuation funds’ plan, community housing organisations will borrow from them and other institutional investors as part of a push to build 40,000 units over five years, backed by federal subsidies providing annual subsidies for 25 years from the fund.
Professor Hal Pawson, associate director at UNSW’s City Futures Research Centre, has estimated a rough government subsidy of $417,000 per dwelling.
The existence of the subsidy appears to be enough to give the superannuation industry confidence that it can generate strong enough returns to meet strict financial obligations to their members.
The annual subsidy payments, along with rental income from tenants, will let housing providers meet financial payments to the big funds, as well as ongoing costs such as maintenance.
The move follows decades of neglect for social and affordable housing, particularly in Victoria.
Last year, former Commonwealth Bank chief executive and Future Fund board of guardians chairman David Murray told The Australian Financial Review that retirement savings should not be used for affordable housing.
‘‘Appropriating superannuation fund members’ money to that purpose is not the solution,’’ he said.

Thanks God, none of my Super will be used there...

 

[Belli]

Such fun to be had. It's been around for a while and the consultation, such as it is, has closed. Those who may be impacted by this proposed legislation, should Parliament pass it, may have to do some serious planning.

I am including a link to the Treasury site. Best to read the Explanatory Materials to get an idea of the maze some will need to navigate.

Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 | Treasury.gov.au

The Government is consulting on the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 (the Bill) and the Superannuation (Better Targeted Superannuation Concessions) Imposition Bill 2023, to enact changes to superannuation tax concessions announced in the 2023-24...

treasury.gov.au

as well as a link to DBA Lawyers which is used by many accountants to prepare Trust Deeds for SMSF's. They have a great deal of expertise in this area.

New 15% tax on $3M+ member super balances –– exposure draft legislation now issued as Div 296 tax | Leading SMSF Law Firm

The Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 (Draft Bill), together with accompanying explanatory materials, was released by Treasury for public consultation on 3 October 2023. The Draft Bill proposes to insert new Division 296 in the Income Tax Assessment...

www.dbalawyers.com.au

 

[mullokintyre]

And maybe sooner than we think.

From today's SMH

Super funds stump up to get more people into homes​

Josh Gordon

HOUSING AFFORDABILITY
Hundreds of millions of dollars of retirement savings will be thrown at the housing affordability crisis under a deal struck between industry superannuation funds to boost the supply of low-cost homes.
In a landmark agreement, four of the nation’s biggest industry super funds, along with industry super fund-owned IFM Investors, have agreed to lend their members’ money to community housing providers wanting to build social and affordable housing using the federal government’s Housing Australia Future Fund.
The five entities – Cbus Super, CareSuper, Hostplus, Rest and IFM – have announced plans to provide long-term debt to pay for low-cost housing ‘‘at scale’’, after concluding they will now be able to generate a strong enough rate of return for their members.
It remains unclear how much the five entities, which collectively manage about $505 billion, are planning to lend or the rate of return they are expecting.
Rest chief investment officer Andrew Lill said housing affordability represented a huge challenge, but tackling it could significantly improve the financial security of members from the retail sector.
‘‘We represent around 1.25 million members aged under 35, and we know housing affordability is a driver of financial stress for many of them,’’ Lill said. ‘‘We’re excited about the potential of this partnership and the impact it could have on our members’ lives.’’
The idea of retirement savings being used for subsidised housing has been talked about for decades but has failed to gain much traction, partly because superannuation funds face strict financial obligations to provide commercial returns for their members.
Although superannuation funds have typically been prepared to invest in public infrastructure such as road, rail and port projects, until now there has been little direct investment in social housing or even lower-cost rental housing.
Under the fund announced last year, the federal government will initially borrow $10 billion to invest, generating an estimated annual return of $500 million, which
will in turn be used to subsidise housing development.
As part of the superannuation funds’ plan, community housing organisations will borrow from them and other institutional investors as part of a push to build 40,000 units over five years, backed by federal subsidies providing annual subsidies for 25 years from the fund.
Professor Hal Pawson, associate director at UNSW’s City Futures Research Centre, has estimated a rough government subsidy of $417,000 per dwelling.
The existence of the subsidy appears to be enough to give the superannuation industry confidence that it can generate strong enough returns to meet strict financial obligations to their members.
The annual subsidy payments, along with rental income from tenants, will let housing providers meet financial payments to the big funds, as well as ongoing costs such as maintenance.
The move follows decades of neglect for social and affordable housing, particularly in Victoria.
Last year, former Commonwealth Bank chief executive and Future Fund board of guardians chairman David Murray told The Australian Financial Review that retirement savings should not be used for affordable housing.
‘‘Appropriating superannuation fund members’ money to that purpose is not the solution,’’ he said.

People who invest their funds into an SMSF have to pass the sole purpose test.
From Treasury

Sole Purpose Test The Sole Purpose Test is a legal requirement that requires all super funds to be maintained for the sole purpose of providing retirement benefits to their members (or to their dependants if any of their fund members die before retiring).

Page 4 The Banking Royal Commission identified many cases of conflicts of interest in industry super funds, where the retirement benefits to members provided by the fund’s activities, are very suspect. These include the use of corporate credit cards, the purchase of corporate boxes at sporting events, the establishment of an internet newspaper and the expenditure on advertising.

The Banking Royal Commission identified a much more disturbing conflict of interest that appears to be a breach of the sole purpose test. It uncovered a clear case where an industry super fund is paying a large sum of money annually as a dividend to its foundation shareholder, the union. (Vol 2. Page 244, 249). This is in addition to any directors’ fees refunded to the union.

According to the Royal Commission that practice is approved because, as long as the super fund has a “rigorous approach to its commercial relationships”, it meets the sole purpose test of meeting the needs of its members.

In would like to know how investing in government sponsored social housing, no matter how noble, gets even close to complying with this requirement.
But then I guess when the Super Fund Industry has such close links with the Labour Party, it does not really surprise that such clauses don't apply to them.
mick

 

[divs4ever]

i liquidated my super fund in 2010 ( during a temporary opportunity )

maybe it was a stupid whim , or maybe cynical foresight

as a former State ( ALP ) member once told me , never get between a politician and a pot of money ( way back in 1970 )

and here we are

 

[Belli]

In would like to know how investing in government sponsored social housing, no matter how noble, gets even close to complying with this requirement.

I understand there are pension funds overseas which invest in residential housing. I had a link at one stage but I cannot find it again. Bugger.

Anyway, with this Div 296 thingy aside from the tax aspect those who have >$3m in super may also wish to consider the impact on estate planning and the possibility of residential age care and how that funding will operate in conjunction with any Div 296 implications (deferred tax debt, etc).

 

[mullokintyre]

Some of the Green investments by Super funds have not turned out as well as hoped. At least so far.
From Evil Murdoch Press

One of Australia’s biggest superannuation operators, the $124bn UniSuper, has been hit with a massive plunge from its green fund, its assets diving 28 per cent since June after being exposed to a raft of electric vehicle and battery makers, including Tesla.
From assets under management of $2.5bn in mid-2023, UniSuper’s Global Environmental Opportunities Fund — perhaps the greenest superannuation strategy in the market, and the most concentrated — has lost $700m, or a third of its value, largely on the back of weakness in the EV market.

The industry super fund giant primarily looks after the retirement savings of the nation’s academics, scientists and researchers but opened to the public three years ago.

Some of its environmentally focused members, of whom there are many, now find themselves caught out by the ultra high-risk strategy, which has nearly half of its holdings concentrated in just 10 stocks.

The bulk of these companies are involved in either renewable energy or electric vehicles and its components such as batteries.

Canstar group executive Steve Mickenbecker said UniSuper’s greenest strategy had proven itself to be extremely volatile over the short term and pointed to the risks of investing with a highly restricted universe.

“Diversification is what you really expect to get when you’re talking about superannuation funds. It comes down to how open you are with members. If you’re very open and obvious with members that you’ve got (near) 10 per cent of your fund invested in one stock then you can mount an argument to say it’s a very high-conviction investment in one company and that will either win for you or lose for you,” he said.

There was a risk UniSuper’s members would jump into the green-focused strategy without adequately considering its suitability, Mr Mickenbecker warned.

Typically, 100 stocks should be enough to provide diversification, he said, but having more than 40 per cent of the portfolio invested in 10 stocks was “pretty concentrated”.

I am sure it will be just fine over the long term.
Hope so, it would be nice for those folks who have their super invested.
Mick

 

[Value Collector]

i liquidated my super fund in 2010 ( during a temporary opportunity )

maybe it was a stupid whim , or maybe cynical foresight

as a former State ( ALP ) member once told me , never get between a politician and a pot of money ( way back in 1970 )

and here we are

Couldn’t you have just taken advantage of that opportunity inside the tax haven of your super fund, and then been taxed less of your profits.

 

[Value Collector]

Some of the Green investments by Super funds have not turned out as well as hoped. At least so far.
From Evil Murdoch Press

I am sure it will be just fine over the long term.
Hope so, it would be nice for those folks who have their super invested.
Mick

Super is just a tax haven you are allowed to keep your retirement savings in, but it is still each person’s responsibility to make sure those assets are invested well, in things they understand.

 

[Belli]

Have a close read if you want. Not hard to see the path ahead. Thing is it may not be your preferred path as it is being set for you.

https://www.health.gov.au/sites/default/files/2024-03/final-report-of-the-aged-care-taskforce_0.pdf

Just keep in mind any decisions now will impact all generations eventually.

 

[divs4ever]

Couldn’t you have just taken advantage of that opportunity inside the tax haven of your super fund, and then been taxed less of your profits.

the Super fund had less than $20 K when i liquidated it

in two years it gained 40 cents and 42 cents respectively

guess who was cheering and laughing all through the Hayne Royal Commission

you would be amazed how many part-time/casual jobs don't put in to Super ( and some were government departments )

it was easier ( and more profitable ) to just buy shares in the vilified 'wealth manager ' , as long as you got out before the Hayne Royal Commission ( which i did )

 

[dyna]

I switched from ART

My ART fund returned over 10 % net for 2023 but since 1st July , it's slipped a bit . ( 8.3 % p.a. after fees )
Super funds do seem to have their ups and downs , like the rest of us , I guess . Still , it is worthwhile not having all your eggs in one basket . If one is to be in this for the long- term then best for me , not to be a total control freak .

 

[sptrawler]

Have a close read if you want. Not hard to see the path ahead. Thing is it may not be your preferred path as it is being set for you.

https://www.health.gov.au/sites/default/files/2024-03/final-report-of-the-aged-care-taskforce_0.pdf

Just keep in mind any decisions now will impact all generations eventually.

So aged care to be paid out of your super and or ppr, super funds to supply funding for social housing and super to invest more in the renewable energy transition?
I Wonder how much else super can fund, in the name of a better retirement.

 

[Dona Ferentes]

So aged care to be paid out of your super and or ppr, super funds to supply funding for social housing and super to invest more in the renewable energy transition?
I Wonder how much else super can fund, in the name of a better retirement.

dementia is sounding better and better.

 

[sptrawler]

dementia is sounding better and better.

I think everyone will be thinking that way soon, inflation the scourge of the retiree. Lol
Just keep working.

The ASFA Retirement Standard

Breakdown of expenses for comfortable and modest retirement lifestyle and the estimated superannuation balance required to achieve this.

www.superannuation.asn.au