SOME MEAT ON THE BONES

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1 VOLUME 27 - ISSUE 8 AUGUST 2013 AUSTRALIA S LEADING SUPERANNUATION MAGAZINE Find us on HERON RATINGS AUSTRALIA S TOP-RATED PRODUCTS SOME MEAT ON THE BONES STRONGER SUPER SPRINGS TO LIFE Post Print Approved PP255003/01111 WHERE THE SUN STILL SHINES Alternative investments now a must have COMMON GROUND? Can pollies work together on super?

2 NEWS IN THIS ISSUE Heron ratings Australia s top-rated super products p10 Editorial p12 Where is the common ground? Can all sides really work together on super, ask industry leaders p14 Some meat on the bones Regulatory muscle begins to grow on Stronger skeleton p18 Where the sun still shines Alternative assets on a roll p22 Appointments p27 Rollover p28 CSR corporate super fund looks to outsource BY BELA MOORE THE default fund for CSR employees, Harwood annuation Fund, plans to outsource its accumulation assets through a tender process. The 13,500 member-strong fund also serves as the default fund for employees of Holcim Australia and Wilmar Sugar and represents one of the last major corporate funds to outsource its accumulation-based benefits. The in-principle decision to transfer the benefits of the fund follows discussions with the plan employers. Deloitte has been approached to support the preparation of Request for Proposal documents to a range of industry and master trust funds. However, long-standing fund chair, Warren Gray, said it is not a done deal and is subject to many stringent conditions. Our main concern, as trustee, is to obtain the best result for all members of the fund, he said. If a suitable fund or fund cannot be identified, then the transfer will not proceed. The tender process is planned to happen over the course of the year, with any transfer occurring in the first half of Harwood is a not-forprofit, non-public offer fund which has assets under management of approximately $1.4 billion. Opposition questions key My costs THE Federal Opposition has signalled it will test whether the Government s new My regime will really deliver cost savings to superannuation funds or default fund members. Tasmanian Liberal Senator, David Bushby, moved prior to the dissolution of Parliament to file a number of questions with the Australian Prudential Regulation Authority (APRA) seeking to determine how many super funds would deliver My products and also the cost base for those products. In addition, Bushby has questioned how many super funds have had their applications for My licensing refused. Key questions Bushby posed to the regulator were the range of Management Expense Ratio/Indirect Cost Ratio for My licences and the average cost. Bushby also questioned whether the Management Expense Ratio/Indirect Cost Ratio included the Operational Risk Contingency Reserve expenses, and further, which funds include the cost in their ratio and which funds charge it as an additional expense. Does APRA and/or ASIC [Australian Securities and Investments Commission) require that the Management Expense Ratio/Indirect Cost Ratio include the Operational Risk Financial Requirement expenses? Bushby asked. A number of superannuation fund executives have complained of the substantial costs incurred in the development of a My product, and questions remain about whether, ultimately, the new regime will be more cost-effective for members than the previous default fund regime. AUGUST 2013 Review 3

3 HERON RATINGS Top 3 show how it s done Top Rated Pension Product AMP Signature Allocated Pension Top Rated Personal Product HOSTPLUS Top Rated Corporate Product MLC MasterKey Business One industry fund and two retail products have emerged as the top products in the six-monthly Heron Quality Star ratings assessment. Those rated at the top of the Heron assessments and earning a six-quality star rating are industry fund Hostplus, MLC MasterKey Business and AMP Signature. Announcing the outcome, Heron Partnership managing director Chris Butler said the three products had achieved the highest numeric rating for the respective product categories. Further, he said it was the second occasion that Hostplus had emerged a winner and the third occasion for MLC MasterKey Business. Hostplus was named as the top-rated Personal Product, MLC MasterKey was named as the toprated Corporate Product and AMP Signature was named as the top-rated Pension Product. Detailing its methodology, the Heron Partnership said its assessment of personal and corporate superannuation products covered about 120 key product features that were grouped under five Areas of Importance: Investment Arrangements, Insurance, Contributions, Ancillary Benefits, and Communications. It said Investments and Insurance had the greatest impact on a product s score, with respective weightings of 55 per cent and 30 per cent. Where pension products were concerned, the company said it reviewed each product s investment arrangements, pension payment frequency, payment methods and options available in respect to the nomination of beneficiaries, options for payment of a death benefit and communication events with members, including ease of access for members to obtain information, and any ancillary benefits offered. It said the main focus was on investment arrangements. SR Outstanding Personal annuation Products AMP - Flexible Aon Master Trust - Personal Aon Master Trust - Personal Essentials Asgard Elements Asgard ewrap Asgard Infinity ewrap Australian Australian Finsuper Division Australian Personal Australian Public Sector Division Australian Westscheme Division BT Wrap Essentials Personal Plan BT Wrap Personal Plan BUSS(Q) Premium Choice Care - Employee Plan Care - Personal Plan Local Government annuation Scheme Accumulation Scheme Macquarie - Accumulator Media - Employer Sponsored Account Media - Personal Account MLC MasterKey & Pension MLC MasterKey Fundamentals MLC Navigator Retirement Plan MLC Wrap - annuation Service Nationwide annuation Fund - NSF Nationwide annuation Fund - NSF - Personal Division netwealth Accelerator Core Employer Sponsored netwealth Accelerator Plus Employer Sponsored netwealth Wrap - Employer Sponsored NGS OnePath OneAnswer Frontier Personal OnePath OneAnswer Personal Outstanding Personal annuation Products Catholic annuation Fund Chifley Personal Plan Colonial First State FirstChoice Personal Colonial First State FirstChoice Wholesale Personal Energy Industries annuation Scheme - Accumulation Scheme Equip Personal Equity Freedom of Choice - Personal Service First State FSP Fund Government Employees annuation Board - GESB HESTA HOSTPLUS Executive HOSTPLUS Personal Plan Intrust IOOF Portfolio Service Personal annuation Legal Plum annuation Fund - Personal Division Pursuit Core Personal annuation Pursuit Select Personal annuation REI Elite REST Select REST Russell - Russell Solution Master Trust - Private Division Russell Solution Master Trust - Personal Division Spectrum - Personal Division Strategy Retirement Fund Sunsuper for life Tasplan Telstra - Personal Plus Unisuper Accumulation (1) WA Local Government Solutions Employer WA Local Government Solutions Personal 10 Review AUGUST

4 EDITORIAL s discordant duet? The recent rapprochement between the FSC and ISN has been welcomed in many quarters, but who is really best suited to speak for Australia s not-for-profit super funds? Has the Industry Network (ISN) become the primary representative body for not-for-profit superannuation funds or is that a role better performed by the Australian Institute of annuation Trustees (AIST)? This is a question which arises out of the policy development relationship announced between the Financial Services Council (FSC) and ISN at the FSC s annual conference in Brisbane in earlier this month in circumstances where the AIST and the Association of annuation Funds of Australia (ASFA) seemed oblivious to the arrangement prior to its announcement. The FSC has always been front and centre in terms of financial services policy development because it is the representative organisation of the major institutional players, boasting a membership that traverses the major banking organisations and the insurers. In that sense, it has always been suitably differentiated from the activities of ASFA, which has maintained an entirely superannuation-related focus. The differentiation between ISN and AIST is not so easily made in circumstances where both organisations boast a similar heritage, have from time to time had the same directors, and most of the time sing from the same policy hymn sheet. In a very real sense, AIST has been seen as a competitor to ASFA albeit that they share many of the same member funds with both organisations providing policy and education services and supporting annual national conferences. In fact, until this month s FSC national conference, the ISN was the odd man out. It was widely regarded as nothing more or less than the political lobbying arm of Industry Fund Services which is, in turn, an The underlying objective of having the superannuation industry speak with one voice on policy is highly desirable. over-arching entity for a vertically-integrated financial services business owned by a number of industry superannuation funds. That vertically-integrated financial services business encompasses Members Equity Bank, Industry Funds Management and Industry Funds Financial Planning. So does the relationship between ISN and FSC really reflect a liaison between an organisation representing a large number of vertically integrated financial services organisations (the FSC) and an arm of another organisation representing a vertically integrated financial services organisation backed by industry superannuation funds (ISN)? If this is the case, then can these organisations lay claim to be developing policy for the superannuation industry as a whole or just the sectoral interests which they represent. Having said all of that, the objectives of the relationship between the ISN and FSC as expressed by their chief executives, David Whiteley and John Brogden, are laudable. Both men are correct when they assert that the best interests of members and the broader sector will be served if the industry speaks to Government with one voice. However it must be remembered it was the ideological approach adopted by elements within the industry funds and expressed via the ISN which led to a deep policy schism between the not-for-profit sector and those representing retail superannuation funds. Certainly, there are many in the financial planning industry who will never forgive the ISN for its multi-million compare the pair television advertising campaign. Then, too, it is arguable that ASFA chief executive Pauline Vamos had every right to feel slighted by the ISN/FSC announcement in circumstances where her organisation boasts a membership that encompasses both industry funds and the major institutional players such as BT, Colonial First State and MLC, and has sought to develop policy approaches representative of both sides of the equation. The chief executive of the AIST, Tom Garcia, might equally argue that his organisation is representative of more of the not-for-profit superannuation sector than is the case for the ISN. The bottom line would seem to be that while the underlying objective of having the superannuation industry speak with one voice on policy is highly desirable, it will not be achieved when key players such as ASFA and AIST are left out of the equation. Given the likely outcome of the forthcoming Federal Election and the possibility of significant changes to the status of default funds under modern awards, it will be interesting to see whether the dialogue between the FSC and the ISN will endure. MIKE TAYLOR CIRRUS MEDIA ABN ACN Victoria Avenue, Chatswood NSW 2067 Locked Bag 2999, Chatswood Delivery Centre, Chatswood NSW 2067 Ph: (02) PUBLISHING EXECUTIVE Publisher Zeina Khodr Ph: (02) zeina.khodr@cirrusmedia.com.au EDITORIAL Managing Editor Mike Taylor Ph: (02) mike.taylor@cirrusmedia.com.au Deputy Editor Milana Pokrajac Ph: (02) milana.pokrajac@cirrusmedia.com.au Journalist - Bela Moore Ph: (02) bela.moore@cirrusmedia.com.au Contributing Reporter Damon Taylor damon.taylor@c-e-a.com.au Ph: ADVERTISING Account Manager Doug Roberts Ph: (02) Mob: doug.roberts@cirrusmedia.com.au PRODUCTION Production Co-ordinator Andrew Tsanadis Graphic Designer Andrew Lim Graphic Designer Susanna Huang Sub-editor Daniel Winter CIRCULATION Customer Service Enquiries Ph: Fax: (02) Subscriptions: One year 11 issues: $ incl GST New Zealand: One year $ Other International: One year $ Average Net Distirubtion Period ending Sept ,000 Please note: Credit card payments for overseas subscriptions will be converted to $AUD, equivalent to the current exchange rates. Review is printed by Bluestar Print, Silverwater NSW. All Review material is copyright. Reproduction in whole or in part is not allowed without written permission from the editor. Supplied images 2013 Shutterstock. Opinions expresssed in Review are not necessarily those of Review or Reed Business Information Review AUGUST

5 SPONSORED BY SUPER DIALOGUE SUPER REVIEW BREAKFAST WHERE IS THE COMMON GROUND? Review and CommInsure hosted a breakfast to find out if both sides of government could come together to deliver a bipartisan approach to superannuation policy, and whether it would provide the right policy settings for a sustainable system which would provide an adequate retirement income for Australians now and in the future. FRANK CRAPIS Head of industry funds wholesale life, CommInsure PAULINE VAMOS CEO, ASFA KAREN VOLPATO Senior policy adviser, AIST PAUL FLETCHER Liberal Member for Bradfield MATT DRENNAN CIO, Mosaic Portfolio Advisers PETER LAMBERT CEO, LGsuper MARIAN AZER Head of global funds services, product, JP Morgan GERARD NOONAN Chairman, Media The announcement that the Financial Services Council (FSC) and Industry Network (ISN) would develop a more productive working relationship may have come as a surprise to many in the superannuation industry, as the policy objectives of industry and retail funds have often frayed at the centre. However, industry unification is one factor which could support a bipartisan approach to superannuation policy according to Association of annuation Funds of Australia (ASFA) chief executive, Pauline Vamos. We all know what this government and previous governments have said this industry is easy to do business with because we can divide and conquer you, she said. We have so many of you that come down to Canberra, we open our doors, we listen to you but in the end because you can t agree, we just do what we want. If the industry wants the government to work together on policy to ensure the superannuation system delivers its desired outcomes namely, retirement adequacy the industry needs to take a greater role in standardising some of its own processes, according to Vamos. Change with certainty Australian Institute of annuation Trustees (AIST) senior policy adviser, Karen Volpato said some change is necessary, but to achieve a bipartisan approach change needed to occur within an environment of certainty. What the industry talked about in terms of change caps, tax on end benefits, income replacement did not provide a road-map for the future, Volpato said, which is needed to ensure a united approach from both sides of government to super policy. Volpato said that reaching a consensus on what constituted adequacy, sustainability and longevity could offer the infrastructure to provide change within certainty. If we actually have an agreed national definition of what is adequate, then policy change can be tested against that benchmark, she said. Any changes to the age pension, income stream incentives and caps could be tested against an adequacy benchmark, Volpato said, and also in terms of the impact of such policy changes on the system s sustainability and longevity. TRUE PARTNERS BUILD SUCCESS TOGETHER. Partnership at CommInsure is about delivering on our promise. A promise to work with you to achieve greater success for you and your members. 14 Review AUGUST

6 APPOINTMENTS APPOINTMENT OF THE MONTH Lieberman joins FSC board METLIFE chief executive Marc Lieberman has been appointed to the Financial MARC LIEBERMAN Services Council (FSC) board. Commenting on the appointment, FSC chairman Peter Maher said Lieberman joins the board as Australia s financial services industry moves from a heavy focus on regulatory change to a time of innovation and the development of new market opportunities. The FSC board now includes Schroder Investment Management Australia CEO, Greg Cooper, and AMP Financial Services managing director Craig Meller, as deputy chairmen. Directors include Equity Trustees MD Robin Burns, BT Financial CEO Brad Cooper, and Andrew Hagger, group executive, NAB Wealth and CEO MLC. Dai-ichi board names TAL s Minto Bargholz is Fidelity s new MD FIDELITY Worldwide Investments has appointed Michael Bargholz as managing director for Australia. Bargholz joined Fidelity in February as senior investment director after a lengthy career with AllianceBernstein, where he was chief executive and managing director, Australia and New Zealand. Michael will lead our growing and successful business supported by a strong management team, said Mark Talbot, director for Asia Pacific ex Japan. His knowledge and experience of the market, built up over many years, will ensure that we continue to focus on the needs of our clients as we broaden and deepen the reach of our business over the coming years. MICHAEL BARGHOLZ APRA appoints Rowell TAL Life Insurance chief executive HELEN Rowell has been Jim Minto has been appointed executive officer of parent company The appointed Prudential Australian Regulation Dai-ichi Life Insurance Company. Rob Thomas, chairman of TAL, said that Minto s new role recognised Authority (APRA) member for a term of five years. the importance of Dai-ichi s First joining the Australian operations and the watchdog in 2002, success of the TAL and Dai-ichi Life Rowell has served in relationship more broadly. a number of senior This signals the expectation that HELEN ROWELL roles including general TAL will be playing a significantly bigger role in Dai-ichi Life s strategy manager, institutions diversified division implementation as the group and general manager expands its footprint for future growth, he said. Of his new seat on the board of Daiichi, policy development. She is currently executive general manager of APRA s visory Support Division. Minto said Helen brings a wealth of experience TAL would be and knowledge to the position of APRA looking to build member from her 10 years in senior roles on the successful within APRA and also from her extensive relationship the experience in the private sector, APRA life insurer has chairman John Laker said. developed with Earlier this year, APRA deputy its parent since He will maintain his role as chairman Ross Jones announced that he would not be seeking reappointment after serving two five-year terms. As of 1 July, APRA member Ian group CEO of Laughlin has taken over the role of TAL. deputy chairman for two years. JIM MINTO New PIMCO VP for Australia PIMCO has appointed Aaditya Thakur as a vice president and portfolio manager for its Australian business. Based in the firm s Sydney office, Thakur will report to head of Asia-Pacific credit portfolio management and head of portfolio management Australia Rob Mead. Thakur will focus largely on trading and supporting portfolio managers locally and throughout PIMCO s global network in the management of Australian dollar and global portfolios for institutional clients. Prior to joining PIMCO, he was a portfolio manager at AMP Capital Investors within the fixed income macro markets team. Thakur is the second senior appointment for PIMCO in the past year, with Sara Higgins joining the company as vice president, account manager in August AUGUST 2013 Review 27

7 ROLLOVER The other side of superannuation WHAT A LOAD OF BANKERS! ROLLOVER did not see a lot of superannuation fund trustees at this month s Financial Services Council annual conference in Brisbane but he did see an awful lot of banking and insurance senior executives. This stands in contrast to the Australian Institute of annuation Trustees and Association of annuation Funds of Australia conferences, where the vast majority of delegates are trustees or people actively working in superannuation funds. Rollover mentions this only because of the policy-making agreement struck between the Financial Services Council and the Industry Network two organisations which certainly have a deeply-rooted interest in superannuation but arguably don t boast a lot of trustee members. If relevance is measured by the number of delegates who attend conferences, then Rollover thinks that ASFA has little to worry about because he is told that Pauline Vamos has already got more than 1000 delegates confirmed for the upcoming Perth conference. Kevin s 07 Sept call a winner for some Many happy returns, oh dear leaders SPEAKING of the recent Financial Services Conference in Brisbane, Rollover doffs his cap to the organisers who, on the eve of a Federal Election and after another change of Prime Minister, managed to get the brand new Treasurer, Chris Bowen, as the keynote speaker in the opening plenary. It seems that some prescient soul within the FSC had invited Bowen in his capacity as a backbencher, and the new Treasurer was so pleased by the invitation that he made time in his busy schedule as Treasurer to attend the FSC gig. Also to be commended was the FSC s final day breakfast session involving former Howard Government minister, Amanda Vanstone, and some other political/financial services notables who very accurately predicted that the Prime Minister, Kevin Rudd, would call an election the following Sunday. Sometimes the stars align perfectly for conference organisers. For others, such as those kicking off a gig on 7 September, things don t look so good. ROLLOVER has been reflecting upon all the politicians who have signaled that they will not be recontesting their seats at the Federal Election and the dark mutterings from some media commentators about the generosity of the superannuation packages they will enjoy. Well, for the record, only those politicians who entered the Parliament before the pugnacious Mark Latham became the Labor Opposition leader will be leaving with a superannuation motza. The rest will have to endure their post-parliamentary days on somewhat more modest amounts. That said, former Prime Minister, Julia Gillard s entry to Parliament certainly pre-dated the rise and fall of Latham, which probably explains reports that she and the former first bloke are looking at purchasing a $1.8 million beachside bungalow in Adelaide the photographs suggest it ain t Kirribilli House, but it will probably suffice for comfortable retirement. The power of everyone ROLLOVER was pleased to note that despite leaving his position as chief executive of Sunsuper, ASFA chair Tony Lally will still be present to support its annual charity event, the Ride to Conquer Cancer. Lally, as most in the industry know, is well placed in this regard, being a former world champion cyclist, representing Ireland at the Moscow Olympic Games in Rollover wishes all competitors, Sunsuper and Lally, all the best in the 200-km race which will traverse most of the major cities around the country in a bid to raise funds for the Chris O Brien Lifehouse at Royal Prince Alfred hospital in Sydney. FOLLOW US ON /SUPERREVIEW /SUPERREVIEW /GROUPS/SUPER-REVIEW AND NOW