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Welcome to Firstlinks Edition 330

The superannuation industry is its own worst enemy. The disagreements spill into the public domain and reduce confidence and trust in the system. Research released this week by Qantas Super shows only 60% of Australians (and worse, only 52% of those in the critical savings years of 40 to 49 years old) trust their super fund to act in their best interests. Confidence in having enough money in retirement languishes at an average score of 5.4 out of 10. Qantas Super CEO Michael Clancy said:

"The 2019 Melbourne Mercer Global Pensions Index has rated the Australian retirement system as the third best in the world so there is a disconnect between the performance of the industry and how members feel ... by better educating members on the improvements they've achieved and the relative strengths of the Australian super system, funds could improve their members' retirement confidence."

It's far more than the ongoing industry fund versus retail fund stoush. Six leading figures have weighed into the super debate again in recent days, including:

  • Finance Minister Mathias Cormann admitted people were sick of politicians "tinkering" with superannuation, and the Retirement Income Review "will not lead to any change". It will simply inform the public on how the super system operates.
  • Senator Jane Hume, Assistant Minister for Superannuation and Financial Services, said the superannuation system was "beleaguered by disengagement and opacity" and government has a moral obligation to make the system as efficient as possible.
  • Bill Kelty, the union executive credited for initiating the current super system, said former Treasurer Wayne Swan was a "miserable bastard" for only increasing the super guarantee (SG) by 0.5% during the Rudd-Gillard years. Kelty and Paul Keating would "go to their grave" fighting for the 12% SG.

  • Innes Willox, CEO of the Australian Industry Group, said the legislated 2.5% increase in SG to 12% needed to be weighed up against the cost to business before implementation.

  • Paul Keating said, "Willox is kidding us ... Superannuation has revolutionised Australia. It is the greatest reform to capital markets in the history of the country. Only a government of indecipherable recklessness would upend or damage such a system."

  • Former Treasurer Peter Costello told a Citibank Conference that compulsory superannuation had failed because "there was not a lot of thought given to how it would be managed once it was in these funds and how it would come out ... We realise that fees were extraordinarily high, some of the products were no good, and at the end of all this, when you get your entitlement, there's still this huge gap as to 'what do I do now?'"

With such strong positions and vested interests, it's difficult to have an informed debate. An example is the Government ruling out the Retirement Income Review considering the exclusion of homes from the age pension assets test. A reader explains why it is inequitable, and Anthony Asher shows how it might work. To give your view, take our quick one-question poll on this sensitive policy change.

Also in this week's edition ...

Carol Geremia is President of a wealth management business managing US$450 billion worldwide, and in our popular Interview Series, she explains what she sees as the biggest misalignments in the industry. This week's White Paper follows a two-year study on how her business decided to change the way it reports performance.

Australian investors increasingly accept the need to find assets overseas, and Joe Magyer shows how a domestic focus leads to a portfolio concentrated in less-attractive sectors.

It's a question every person either in or facing retirement asks, and while there's no one correct answer, Graeme Colley asks how much superannuation you might need. On a related subject, Craig Racine describes three issues he is hoping the Retirement Income Review will address to improve retiree understanding of the risks they are taking.

CBA shareholders and holders of hybrids should all have received an offer to invest in the newest hybrid, with a deadline to accept of 8 November 2019. Adam Fleck and Shaun Ler offer their views, plus they check the maturities and relative merits of other hybrids.

The exciting potential of 5G technology will soon capture us all, and John Malloy looks at the investment opportunities and the markets where opportunities are underappreciated.

And Jonathan Rochford gives his monthly update on the sometimes quirky, revealing and unusual media links you may otherwise miss.

Don't forget our quick poll on including homes in the age pension assets test.

 

Graham Hand, Managing Editor

For a PDF version of this week’s newsletter articles, click here.

 

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