Why independence is important in the superannuation sector

In the latest edition of The Brief, CEO of Prime Super, Lachlan Baird discusses independence is so important in the superannuation sector, and how it ultimately affects you.

The super industry has a number of different types of funds, with different operating models. Firstly, there are industry funds which are guided by unions and employer associations which have influence to drive the overall direction of the fund. Secondly, there are master trusts and retail funds, which are owned by banks and other financial institutions, and have the primary objective to make a profit for their owners. Thirdly, there are self-managed super funds that are generally run for individuals or a small number of related individuals, largely driven by advisers who also have a profit objective.

As an independent super fund, Prime Super is in control of the actions we take to provide the right outcomes for our members. We are free of ties to other parties that could influence decisions and drive other agendas. Directors are appointed to the board of Prime Super based on merit, professionalism and knowledge of specific industries.

Members benefit from being a part of Prime Super, an independent organisation that makes objective decisions on how members’ money is invested and how the overall business is managed.

Superannuation is part of the broader financial services industry, but unlike others in the financial services sector the superannuation industry has a ‘higher calling’, that is the generation of a pool of funds to provide an income stream to members in their retirement.

A for profit motive during the accumulation phase is at odds with this higher calling, and a truly independent structure is a clear demonstration of the focus on delivering an appropriate outcome for members, as there can be no ulterior motive.

Australia has grown on the back of independent small businesses. The Australian Small Business and Family Enterprise Ombudsman noted in a report entitled “Small Business Counts – December 2020” that small business (that is, employers with less than 20 employees) account for 2.3 million businesses, and those with 199 or less employees account for 99.8% of all business in Australia. These businesses are by and large independent small businesses. Prime Super understands small businesses, and the Australian business environment.

Over the years Prime Super has demonstrated the benefits of an independent board and business through the delivery of strong returns and risk adjusted returns, backed by real value for money superannuation.

For the six months to 31 December 2020, Prime Super’s MySuper option return is 9.39%, and in the top 25% of super funds. Two other of our investment options are also in the top quartile: the Managed Growth option (at 11.53%) and Australian Shares at 16.59%. Over the long-term Prime Super remains strong, with six of our nine eligible investment options in the top quartile over 10 years.*

When our investment returns are adjusted to reflect the level of risk taken to achieve them, Prime Super still performs very strongly; of the 55 funds on a list of risk adjusted returns prepared by research agency Rainmaker, Prime Super is ranked third.*

Most members also want to know they are getting a fair deal on fees. According to Rainmaker, not-for-profit funds offer the lowest cost superannuation.

Prime Super, a not-for-profit fund, does not charge investment or administration fees for accounts under $6,000 which means that members with lower balances will not have their money eaten away by fees.

An independent super fund, Prime Super is ultimately owned by members. We make independent and objective decisions with a focus on low cost and strong investment performance.