The institute, a public policy think tank chaired by Former NSW Labor MP John Watkins, found that found that over a working life of fifty years, industry fund members had almost 50 per cent more when they retired than those who invested in ‘for profit’ retail funds.
Macquarie University and University of Sydney Business School economist Mike Rafferty – who carried out the research for the McKell Institute – said the difference in performance “clearly reflects the way super funds are governed.”
“We were asked to examine the relationship between fund performance and governance structures of superannuation funds in the Australian market and what we found was startling,” said Mr Rafferty.
“Investors fare best with funds managed by not-for-profit organisations, because such firms focus exclusively on serving investor interests.”
Industry funds operate with a “representative governance model” and are typically run by employer associations or unions operating in the sector.
In addition, the research found that greater diversity is found on the boards of industry funds, which helps reduce the possibility of myopic “group-think” in decision-making.
Mr Rafferty said that this representation “most closely” satisfies the objective of meeting the best interests of members.
“Retail funds, on the other hand, usually appoint employees to governing boards who are understandably focused on maximising profits via management fees,” said Mr Rafferty.
“For this reason, their short-term objective is to grow the size of the fund rather than maximising member’s benefits over the long term.”
Mr Rafferty noted the importance of this study in light of the federal government proposition to lift the retirement age to 70 by 2035.
“People hoping to retire at an earlier age need to look very closely at these findings,” he added.
