Discuss about the Efficiency Of Australian Superannuation Funds.
Superannuation is the process in which organizational pension program is created by a company for the benefits of the employees. Superannuation is also known as a pension plan of a company (Reddy 2016). After the global financial crisis that took place in 2008 the superannuation funds declined in the value. The discussion deals with the issue.
As per the AASB 119, which is the Australian Accounting standard Board for there exists more than superannuation funds of more than 500 in Australia. Out of all 362 of them there are assets that totals to more than $50 million. Assets of Superannuation summed up to $2.05 trillion at the end of the quarter of March 2015, a new record as per the Superannuation Funds Association in Australia. The varieties of the superannuation fund in Australia includes:
Corporate funds: The corporate funds is the superannuation or the pension plan that is arranged by the business who functions the fund under a trustees board employed by the employees and employer (Gupta and Jithendranathan 2015). The corporate funds include a distinct part of a big industry or retail super fund especially for the small-sized and medium-sized employers. The corporate funds characteristics includes the funds that are run by the funds of industry or an employer that will in usual return all profits to members which are run by retail funds and will hold on some profits. They are in general mid cost to low funds for large employers for small employers be high cost.
Public Sector funds: The funds of the Public sector were initiated for the departments of Federal employees and State government. Most are only open to employees of the government. The primary characteristics involves that is contributed by the employers for more than 9.5% of the minimum amount. It is the investment range choices that are modest and will meet the needs of most of the people. There exists number of long-term members who have definite advantages. The members in an accumulation fund who are newer usually have less fees and some offer to accounts of MySuper.
The impact of the financial crisis on superannuation has two types of baseline scenarios, the first part deals with baseline scenario that the historical superannuation fund returns up to 2008 up to -6.4% in the 2008. Members of the eight major Australian super funds have seen their money more than double since the Global Financial Crisis (GFC) as the funds have racked up 100 per cent returns since the GFC, according to Super Ratings (Bui, Sarath, and Ahmed 2016). Moreover, the funds' results were around eight per cent per annum ahead of inflation and were back on track to more than double the expectations (Heng,Niblock and Harrison 2015). However, Super Ratings stressed that the numbers were measured from the onset of the GFC, rather than from the end, and there were only a few funds that managed to post impressive results over both periods.
Bui, Y.H., Sarath, D. and D. Ahmed, A., 2016. Efficiency of Australian superannuation funds: a comparative assessment. Journal of Economic Studies, 43(6), pp.1022-1038.
Gupta, R. and Jithendranathan, T., 2015. The impact of superannuation fund choice legislation and the global financial crisis on Australian retail fund flows. Financial Services Review, 24(3), p.217.
Heng, P., Niblock, S.J. and Harrison, J.L., 2015. Retirement policy: a review of the role, characteristics, and contribution of the Australian superannuation system. Asian?Pacific Economic Literature, 29(2), pp.1-17.
Reddy, W., 2016. Evaluation of Australian industry superannuation fund performance; asset allocation to property. Journal of Property Investment & Finance, 34(4), pp.301-320.