Productivity Commission Super Report: a better plan

Productivity Commission super report: Cleaning up the $2.7tn super industry

Productivity Commission super report ignores critics to recommend 'best in show'

Productivity Commission super report: How to game the 'best in show' super rules

In summary the Productivity Commission spent a few years producing a report saying that there should be a top 10 list of default super funds to reduce the amount of ripped off customers.

A fairly simplistic solution to the problem that can be gamed and will only create more opportunities for corruption.

The funds should be ranked, but not only 10 - rank them all on a 5 point scale based on different categories. Here are some suggestions:
1. Fees
2. Performance over 3, 5 and 10 years. New funds can be penalised for not having long-term proven performance.
3. Passive / Active. I personally feel most people should be passive, but if they specifically want active they can make the choice.
4. Risk (volatility).
5. Diversification (overlaps with risk).

Once every fund is classified, people can go to an online portal to search for the fund that best satisfies their requirements. It would be simple to create a set of questions that narrows down the choice:
- How many years till retirement? Lower number implies lower risk tolerance
- How much risk do you want to take (are you a risk taker?) ? Also impacts risk.
- What is your balance? Balance could impact fee structure and risk tolerance.
- How much do you want to retire with?
- Approximate income?

After asking the questions the site should be able to to provide a probability of the funds satisfying the requirements. It might also suggest that retiring on $100k for example may not be realistic and that expectations need to be managed.

Finally, the user needs to specifically choose a fund and need to accept the risks they are taking. E.g. you are choosing a high fee fund with high risk and poor performance even though you are retiring in one year, do you want to continue?

In summary, classify the funds and get users to explicitly select the best funds for their situation. Much better than a list of top 10 funds, which is much more exploitable.

 

I know this is a whacky thought but I'd like to see a slight change in terminology. Do away with the phrase "superannuation fund" and replace it with "personal retirement account." I reckon the focus should be on the person rather than the fund which is associated with employer contributions and personal ones if the individual is in a position to make them.

I've probably had too many coffees this morning to come up with that thought.

 

The way that the government uses superannuation to exploit us is disgusting and probably criminal if the truth be told.

Creating a $2.199 trillion industry to manage super that siphons off capital from all of us, and in particular the uninformed, tweaking rules to strategically tax targeted groups who are by no means necessarily wealthy, providing little to no information or support to the public. This is not just about Labor, it's the Liberals too.

If @Nodrog and @SatayKing were made the dictators of Australia with a no party system and given full autonomy to change each and every law, I am almost certain Australia would have a brighter future, and not just for beer lovers. Jokes aside, I believe I am correct.

Our governments are the ******* children of group think and short term political gain. Their decision making would be improved with a dartboard and a blind darts player. We are lucky to have a country like Australia, but we can't ride that luck forever. In 20 years when everyone says WTF happened, put all the governments on the stand and have a real Royal Commission into incompetence.

Enough ranting. I must be in a <insert word here> mood. But it's still true.

PS sorry gents for giving you that poisoned challis. You wouldn't make everyone happy in the short term, in fact you'd probably upset many, but Australia would be better.

 

. I might have to work on my dictatorship skills if that’s the case. Given that I can’t even manage to exert any authority in our own household (even the chickens are higher in the pecking order than me) I’m not sure how I’ll go with the whole country.

@SatayKing would likely be much wiser and superior to me in that role. In regard to tax relief the first thing he would likely legislate is the complete removal of excise duty from Gin.

 

@Zenith Chaos perhaps the recent mood change is to do with Labor policy if legislated likely to delay your date for FIRE? And / Or force you to drink lesser quality red wine?

 

Hmm, Satay King Morgoth has a nice ring to it.

Nothing better than a benign dictatorship where everybody is allowed to be cranky at times.

As for upsetting others, I couldn't give a rats. After all, it's for their own good. And I'll reserve the right to define "good."

 

The problems that aren't easily managed and most important are those associated with the end user. Lack of interest, knowledge and misunderstanding one's own tolerance for risks can't be legislated away while maintaining free choice.

 

All I mostly hear from the average person particularly younger folk is why would I put money into Super when they keep changing the rules all the time. Importantly the concern about the age that they can access it increasing over time.

The constant meddling by Governments is destroying confidence in Super.

 

Yep, as most end users are likely to be both incompetent and impetuous with a total lack of awareness about their lack of ability, ya simply take away any choice. Gotta pass a witten and oral exam before ya let anywhere having a go at makjng investing decisions.

Told you I reserved the right to define "good!"

 

Long live King Satay the Wise.

 

I'd fail both tests by the way.

And it is the continual changes, mostly for political reasons, which irritates many people. Certainly does in my case. Totally stupid that a heap of mine is in accumulation phase as a consequence of the $1.6m cap.

If they were fair dinkum about having a cap, then require the excess be withdrawn.

Stupid decisions about tax free income merely because someone reaches 60 years of age.

Implementing a super guarentee hoping employers would play by the rules and taking a light touch instead of stomping on those rorting their employees. Increase wages and take the SG component directly from the employees and not the employer. Proper centralisdd payroll programing could achieve that I reckon.

Dumb policies both past, present and probably in the future which have not and will not necessarily secure superannuation as a source of a fair avenue for a retirement income stream but will further enhance the industry seeking ways around legislation in order to minimise tax imposts.

I'm not cranky as some but I am disheartened to a degree.

 

Yep, and a strong reason why the FIRE communities are gaining popularity (amongst other reasons). Many are saying that if your 2 brain cells can gather enough knowedge to secure a passive income stream, then don't worry about the super scheme.

Recently I saw 2 independent FPs and was interested that both said to really boost my super (and I'm a fair way off being able to touch it). Oh well, on with it....

 

Unfortunately, free choice does not work for the masses.

In 1977 (42 years ago) when I was not quite 21, I was told that people my age should not count on the Aged Pension when we retired as the country would most likely not be able to afford it.

We were told that we would mostly likely have to fund our own retirement. Some had Super and they should make the most of that. Those without Super had other options they could utilise.

It was all in the media. Most took no notice of the warnings. Most of those without Super did nothing. That was their free choice.

Many of those with Super even spent the Super balances on car, holidays, etc when they received their balances in cash when changing jobs . In fact, I remember people who changed jobs just so they could get their hands on their cash . That was their free choice.

I fully believed the reports/warnings and was scared shirtless. I had access to Super and have always tried to maximise the way it could be used. The only time I started withdrawing money from Super was when I entered pension phase (at age 55).

I also built up a reasonable property portfolio as a Plan B in case my Super wasn’t enough (bit of risk management).

There are a lot of people my age who can’t retire. Even when they do, many will supplement their Super with the Aged Pension.

Free choice does not work for the masses.

 

That's why I chose you as the all seeing, all hearing wise dictator. No-one has mentioned FIREEs planing to live off franked dividends on a planned income that would be significantly reduced by this decision. Hard to justify my position over pensioners and retirees but I've paid a lifetime's worth of tax already and feel justified in doing whatever I want from this point without harming others.

I'm sure the government doesn't see it that way, I'm guessing it's more along the lines of "hey young fella, you're a good tax payer, you're helping keep Australia great, and how are we going to fund our harebrained schemes without you?"

The difference to me could be $10 Aldi quaffers (haven't tried one yet but the media seems to rate them) versus $30 Barossas. Holidays on the south coast of NSW versus south coast of France.

Seriously, it is a big inconvenience and I'm not a very happy boy.

....and when I say "young fella" it's more about the government seduction rather than my "youth".