Super funds should prove efficiency

One of Australia's smaller industry funds has called for superannuation funds to be subjected to scrutiny of their efficiency in the face of continuing arguments about the need to pursue scale.

Energy industry fund, NESS Super has called for the use of an efficiency ratio at the same time as questioning analysis around the need for scale and the pursuit of mergers.

In a submission to the Productivity Commission (PC) Inquiry into Alternative Default Models, NESS Super has claimed that the emphasis on increased scale and mergers as the mechanism to deliver efficiency has been a significant distraction to the determination of what actually drives efficiency and inefficiency in both large and small funds.

"Smaller funds can be both efficient and competitive," the submission said. "If it is not scale which drives efficiency, the real issue to be addressed is looking beyond scale to what factors actually drive efficiency and what are the practices that detract from providing value to members that should be stamped out."

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"If the goal of a superannuation fund is to be efficient, rather than subject only small funds to scrutiny, it is our recommendation that all funds be required to publish an efficiency ratio and where this ratio exceeds an industry benchmark be required to justify their use of members' funds," it said.

The NESS submission said that the fund operated under a model where it sought to access scale through its outsourced providers.

"As a small fund, we must operate with a strong inherent discipline in the financial management of members' money in order to continue to be efficient. Marketing expenditure is closely controlled and targeted with the board taking a strategic decision that it would not use members' money on expensive sponsorships or advertising campaigns."