ELEANOR HALL:
An analysis of Australia's buffeted superannuation industry is predicting that the number of funds in Australia will fall by more than half over the next five years.
This is partly due to the global financial crisis, but it's also because of problems with the industry's regulation.
So what will it mean for competition in the sector?
Catherine Clifford reports.
REPORTER:
There's a lot of super money out there and it's costing more and more to manage it. Increasingly, funds are preferring not to.
Michael Rice is the managing director of Rice Warner Actuaries, whose company examined projected changes in our superannuation market over the next 15 years. He says the credit crunch has become the catalyst for many funds to wind up.
MICHAEL RICE:
There are about 514 left today and we're predicting that this will drop to about 220 in the next five years. Most of these funds will wind 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.
REPORTER:
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.
Jeff Bresnahan is the managing director of research agency SuperRatings. He says that industry consolidation should have happened a long time ago.
JEFF BRESNAHAN:
There are far too many super funds out there at the moment, and you can't have a board of 16 or 20 people (from funds merging). Therefore, people need to stick their hands up and resign from those boards. In a lot of cases people aren't willing to, whether it's ego or whether it's a financial consideration, or whatever. And in quite a lot of cases that has actually prohibited funds from getting together.
REPORTER:
Jeff Bresnahan says Australians are their own worst enemies 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.
Jeff Bresnahan says the Eligible Rollover Funds are flying under the radar and making a killing in fees.
JEFF BRESNAHAN:
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.
REPORTER:
The Federal Government is now looking at introducing a central clearing house to deal with some of our super problems.
Minister for Superannuation Nick Sherry:
NICK SHERRY:
A central clearing house would enable the auto-rolling together of those six million, almost 6.5 million lost accounts - so they would be reunited with their owners. Now that would clean up a major inefficiency in the system.
I think it will be the middle of this year before we finalise the design of the system and probably the end of the year before there is legislation. Then I think realistically it would operate (probably) in the middle of next year, at the beginning of the next financial year.
ELEANOR HALL:
The Federal Minister for Superannuation Nick Sherry ending that report from Catherine Clifford.