A scrappy election
While polls point to Labor winning the national election that’s due by May, it’s still anybody’s game. The conservative Morrison government has previously chased votes by suggesting early access to superannuation funds, much to the industry’s nervousness. It’s a popular idea: workers took big advantage when they were allowed to access their savings in the early days of the pandemic, leading politicians to suggest first-time home buyers could do the same.
Meantime, for a government that’s desperate to woo more women following the sexual harassment scandals in Canberra, the opposition will likely push it to honour a pledge to remove a cap on compulsory contributions – a small change that would help close the gender gap in super savings.
Climate cred
Australian super funds are lining up to make net-zero pledges for their investments. While some are restricting thermal coal investments, most have few concrete plans on hitting their goals other than engaging with firms and threatening to vote against non-compliant boards. That’s got activists busy, emboldened by last year’s landmark court settlement when Retail Employees Superannuation Trust was sued for not being green enough. The issue has left super funds between a rock and a hard place as lawmakers on both side of politics engage with the fossil fuel industry to differing extents.
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A major test of super funds’ new-found climate concern comes in the first quarter when BHP Group offloads its oil and gas assets to Woodside Petroleum. Do they cut their exposure to Woodside when holders of BHP are issued new shares, or keep them with a view gas is a transition fuel toward a low-carbon economy, appeasing politicians?
That elusive yield
The core focus of funds — to generate investment returns for members — is getting tougher. Super managers have been warning strong returns will be harder to come by as the easy money from the stock rebound after the early days of the pandemic has already been made. Funds will instead continue a years-long program to ramp up purchases of private assets with inflation-linked income.
While Australian super funds offered a median return of 18 per cent in the year through June, they could be doing better. US. peer California Public Employees’ Retirement System returned 21.3 per cent in the same period, with only two Aussie funds beating that performance, according to Lonsec Group. Just this week, UniSuper, one of the biggest Australian pension fund, cut the investment return targets across its retirement savings plans.
Perform… or else
After years of warning super funds to improve their returns, the Australian Prudential Regulation Authority has lost patience. It’s ordered two funds in as many months to merge partly due to poor performance, with more actions likely to come. In the so-called choice sector, where workers select their own investments, more than 60 per cent of plans are underperforming APRA’s benchmarks, while fees and costs are considerably higher than default options but without any clear benefit to members’ savings, APRA said last week.
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