A secret plan to nationalise Australia's $3 trillion super system could rob millions of workers out of six figure sums all to provide a slush fund for political pork-barreling, a new report has found.
A cabal of politicians want to funnel millions of Australians into a government-run super fund, with some MPs lobbying the Treasurer to convert the Future Fund into a default super fund.
But new Industry Super Australia (ISA) modelling shows that a 30-year-old worker in such a government-run fund would pay exorbitant fees, earn lower investment returns and end up $126,000 worse off at retirement compared with being in a top-performing industry fund.
The report Nationalising Super: Why politicians should keep their hands off your retirement savings reinforces earlier evidence from the Productivity Commission (PC) that a government-run super fund would be prone to political interference and riddled with conflicts of interest.
The ISA report warns governments, with almost unchecked power to spend workers' savings, could find it hard to resist ladling out money for pork barrels in marginal seats, all for the purpose of chasing votes rather than good investment returns.
Political ideology could also trump the financial interest of members, especially when a government makes itself the investment officer, trustee, owner, regulator and supervisor.
The Productivity Commission also found internationally government-run super funds invest conservatively as few governments can withstand the political risk of negative returns during market downturns, leading to less money at retirement and more pressure on the Aged Pension to pick up the slack.
And if the government-fund delivered lousy investment returns the taxpayer would be expected to bail it out – which combined with the higher pensions costs is a recipe for higher taxes.
Independent research from UMR shows that people trust not-for‑profit super funds more than the government when it came to looking after their financial interests (60% v 40%.)
ISA's report concludes that a government-run super fund would deliver lousy returns, high fees and could lead to higher taxes. The impenetrable tangle of conflicted interests could turn the retirement savings of millions of Australians into a slush fund for governments to spend on political whims.
The push to change the Future Fund into a national default coincides with new laws coming into place on November 1 that will 'staple' workers to a single fund unless they choose otherwise.
