As the money accumulating in the superannuation system is increasing so too are the measures to ensure members of the public are getting proper bang for their buck as far as their chosen retirement savings fund is concerned.
And as the spotlight is being shone more often and more seriously on public offer funds more impropriety is being uncovered.
To this point in January, after the Australian Securities and Investments Commission (ASIC) conducted an investigation into the practices of Statewide Superannuation, the Federal Court issued the fund with a $4 million fine.
The penalty was levied because Statewide Superannuation was found to have provided miscommunication to thousands of its members telling them they had risk insurance cover when they did not. But that’s not all. The super fund was also found to have overcharged its members more than $2.5 million in insurance premiums for individuals who no longer actually held policies.
And to top it all off, it was determined Statewide failed to comply with its obligation to report the issue to ASIC within 10 days of its discovery. Three strikes and you’re out.
This is pretty ironic when you consider all of the mud the industry fund sector has slung at SMSFs with regard to compliance issues, such as those associated with personal use assets.
Of course performance too is coming under greater scrutiny now with the introduction of the Your Future, Your Super legislation. Under these rules from 1 July 2021 the Australian Prudential Regulation Authority (APRA) will conduct an annual performance test on the MySuper offerings for consumers based upon fees and returns generated.
If a fund happens to fail the performance test two years in a row it will be required to take formal steps to address their lack of results and will not be able to accept any new members until this is done.
So far, 80 MySuper offerings have been tested with 67 products, or 84 per cent, registering a pass to the performance test, and 13 products, or 16 per cent, registering a fail.
You may be wondering what this means for the SMSF sector and the answer I think is inadvertent validation of the choice many of you have made to run your own superannuation funds.
I have said plenty of times the growth and sustained popularity of SMSFs has been amazing considering all of the criticism the sector has copped from other segments of the industry without really having anyone or body in its corner to deflect these blows and fight back.
It seems the only mechanism it has relied on to fight back has been success. If SMSFs have been an abject failure I wouldn’t be writing this piece right now and you wouldn’t be receiving this newsletter.
And this was confirmed last month by some Roy Morgan research that indicated SMSFs recorded the highest satisfaction rating among superannuants with 80.6 per cent of respondents saying they were very happy with their fund’s performance. This was up from the 69.9 per cent recorded in the year before. No failing test scores here.
But regardless of your own assessment of your fund, the detractors from all cohorts, seem to have unintentionally confirmed you’ve made the right choice in running an SMSF even if it is something most of you knew already.''