A Global Perspective on Financial Regulation
Edited by John Evans, Michael Orszag and John Piggott
Chapter 4: Conflicted Super Structures: Are Australian Investors Being Short-changed?
Anthony Asher* Are members of superannuation (pension) funds in Australia being shortchanged? Different types of superannuation fund do charge significantly different fees. Some of the difference clearly arises from the quality and scope of the service offered, but there are other, less innocent, explanations for the high level of fees. Of particular concern are the conflicts of interest in some organizational structures. The first section of this chapter identifies the various types of fund. The second describes the main kinds of regulatory protection provided to members, some of which give rise to additional expenses. The third section examines the role of market or regulatory failures in explaining the apparently excessive level of charges of some funds. The fourth section looks at the functions performed by fund trustees, and identifies potential conflicts of interest as an alternative explanation of additional charges. The fifth section looks at the charges associated with the different types of fund and identifies the main drivers of expense. The final section suggests some topics for additional research and addresses some policy questions. 1. TYPES OF Superannuation FUND Australian superannuation funds are classified in a variety of ways in legislation and in the industry statistics published by the Australian Prudential Regulation Authority (APRA).1 There are inconsistencies in the definitions depending on the purpose for which they are used, but the main classifications are summarized in Table 4.1. In this chapter, we are concerned only with complying funds.2 Complying funds qualify for favourable tax treatment of investment income,...
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