The break-up of your super asset
The first point to note is that super is an employer sponsored benefit. However, very few employers take full advantage of it as a benefit for their employees. In fact, most avoid managing it as much as they can. In short, employers have not assumed any level of control around super as an employee benefit.
In turn, most employees ignore their super, and consequently end up with multiple accounts and a retirement income stream that is less than optimal.
Progressively, government regulation around super has become more and more invasive. It is clear that the government believes they have to control the management of your super.
The government is now manoeuvring to take more and more control over employer super under their MySuper based service.
The recent review by APRA where some MySuper models pass scrutiny and then some fail has been publicised and possibly misunderstood by the public as a statement around the product as opposed to a question of the wrong investment strategy.
Individual clients serviced by AXIS often ask ”Someone else is looking after my asset? Aren’t they?”
Whose ownership strategy?
Based upon any examination of activity around super, it would appear there are three models around employer super:
- There is the platform model traditionally presented by the likes of the various master trusts and industry funds, with modern awards also having an influence
- Then there is the MySuper Investment Default model, the approach gaining more and more attention from the government, where regulation of product choice and performance is being assumed by the government without reference to the employees who “own” the individual account balance. It is clear that this government intervention is in disagreement with the traditional model presented by the financial services industry and the government has been very successful in tarnishing the reputation of Australia’s financial institutions
- There is an alternative model which is beginning to receive more attention and is based on the premise that the employees who own the asset, even if they have not properly controlled it, can be easily persuaded to engage with their super as a wealth creation plan. The presentation of super as a remuneration benefit to a workforce requires the involvement of three parties:
- The employer to promote and manage super as a remuneration benefit
- The engagement of an adviser service, who operate under their own Australian Financial Services License and have the proven ability to deliver personal advice at an individual account level
- The appointment of the best platform arrangement, with a focus on a competitive cost structure but with the right features to enable both contribution and investment strategies
Which service model might work best?
When compulsory super started back in the nineties, this was the million dollar question. Nowadays, I would have to say that the question of the future model of optimising your super at the point of retirement is now the trillion dollar question.
The broad message coming from the government is that the financial services industry is not to be trusted but is the government prepared to explain how they are funding their program of infrastructure spend across Australia and what proportion of this spend is being funded from super?
If the government is imposing the MySuper Default Investment model, they are possibly assuming more control than you realise.
Super as a controversy
It’s easy to land in the wrong place if we don’t think about the process as it evolves.
Super should be managed as a personal asset and the financial services industry must provide a tailored and personal service at individual account level, in optimising everyone’s projected income in retirement.
Feel free to contact AXIS Financial Group by calling 1800 111 299 and asking to speak with one of our consultants, be it myself, Harry, or Roy or Richard.