Posted 2 hours 13 minutes ago Updated 2 hours 19 minutes ago
There is a lot of superannuation money out there and it is costing more and more to manage it. Increasingly, funds are preferring not to.
Actuarial firm Rice Warner Actuaries has conducted an analysis of Australia's buffeted superannuation industry, examining projected changes in the superannuation market over the next 15 years.
The firm's analysis predicts the number of funds in Australia will fall by more than half over the next five years.
The managing director of Rice Warner Actuaries, Michael Rice, says the credit crunch has become the catalyst for many funds to wind up.
"There are about 514 left today and we're predicting that they'll drop to about 220 in the next five years," he said.
"Most of these funds wound up because of high compliance costs, licensing and obligations on trustees, and also the fact that superannuation is a very high capital and labour intensive industry."
While the number of funds may be shrinking fast, the money being poured into them will rise sharply, with 52,000 new super accounts being created every year for the next 15 years.
The managing director of research agency SuperRatings, Jeff Bresnahan, says the industry consolidation should have happened a long time ago.
"There's far too many super funds out there at the moment and you can't have a board of 16 or 20 people, and therefore people need to stick their hands up and resign from those boards," he said.
"In a lot of cases people aren't willing to, whether it's ego or whether it's a financial consideration or whatever. In quite a lot of cases that's actually prohibited funds from getting together."
Mr Bresnahan says Australians are their own worst enemy when it comes to managing their super.
He says there are only 10 million workers but we have 30 million super accounts between us, which is far too many.
Mr Bresnahan says the eligible rollover funds (ERF) are flying under the radar and making a killing in fees.
"The promoters of these sort of funds are raking off somewhere around about $100 million plus a year in fees. If money is unclaimed, then put it in consolidated revenue and let the taxpayers take advantage of it," he said.
The Minister for Superannuation, Nick Sherry, says the Federal Government is now looking at introducing a central clearing house to deal with some of our super problems.
"A central clearing house would enable what we call the auto-rolling together, those six, almost 6.5 million lost accounts being reunited with their owners. Now that would clean up a major inefficiency in the system," he said.
"I think it will be the middle of the year before we finalise the design of the system, probably the end of this year before legislation, and then I think realistically operating probably the middle of next year, at the beginning of the next financial year."
Adapted from a report by Catherine Clifford for AM on January 6.
