Industry Super Australia attacks Future Fund concept

The peak body for industry superannuation suggests defaulting workers' retirement savings into the Future Fund would be a costly mistake.

According to Industry Super Australia, workers would be about $124,000 worse off if their superannuation was with the Future Fund, instead of a top performing industry fund.

Announcing research conducted by former Treasury official Phil Gallagher, ISA is adamant that any move to push workers' retirement savings into the Future Fund would result in poorer performance.

ISA said a worker earning $80,000 a year could ultimately lose 13.6% - or $124,850 - of their retirement savings, if they forgo a top performing industry fund for the Future Fund.

The peak body said the analysis is based on top quartile balanced pension fund options, because their asset allocation is "substantially similar" to balanced accumulation options, but with a similar tax treatment to the Future Fund. The research shows those options compare favourably to the Future Fund, which lags behind by 1.06 percentage points, with average returns for the seven years to 30 September 2018 at 10.7%.

ISA said its insight comes in response to widespread speculation the Future Fund could be opened up to more Australians as a default superannuation fund. ISA chief executive Bernie Dean said Australians defaulted into the Future Fund would be consigned to an "under-performing government-run fund."

"We need to find ways of connecting workers with quality super funds, not find new ways for them to end up with less in their accounts," Dean said.

"The extent of the loss calculated under the Future Fund scenario suggests ideology is blinding some to the best ways to put members' interests first."

ISA confirmed that in compiling the research, Gallagher - who serves as the body's "special retirement income adviser" - considered the Future Fund's performance against the top performing balanced pension options from industry funds and modelled retirement savings from age 30 for about 40 years.

Comparing the Future Fund with top quartile performing funds is fair, according to ISA, given it would compete directly with funds subject to a strong quality filter.

"It should be compared with high quality funds," ISA said.

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