Essay by Eric Worrall
Australian Superannuation (retirement) funds have convinced the government to allow them more freedom to “invest” in risky green tech startups.
How Australia’s huge superannuation funds can do much more to fight climate change, with a little help
Published: January 23, 2024 10.25am AEDT
Arjuna Dibley
Head of Sustainable Finance Hub, The University of Melbourne…
These accumulating automatic payments have turned the Australian super fund industry into one of the world’s largest, and the fastest-growing. Worth $A3.5 trillion, our superfunds sit alongside funds from Canada, Japan, Netherlands, Switzerland, the United Kingdom and United States to make up 92% of total global pension assets.
…
At the same time, many Australian funds continue to invest in carbon-producing companies, such as oil and gas, even when they claim to be making “green” investments.
…
The government has said it will make reforms on one roadblock – the funds’ performance-testing framework.
Why super funds rarely invest in clean energy
Because superannuation funds are required by law to invest retirement savings for the best return for their members, they give preference to investments that offer the best financial returns with the lowest level of risk.
Funds see companies that are developing and deploying new technologies or operating in areas of significant public policy change as higher risk. That’s a big reason why new green technologies struggle to attract institutional capital compared to those based on fossil fuels.
…
Read more: https://theconversation.com/how-australias-huge-superannuation-funds-can-do-much-more-to-fight-climate-change-with-a-little-help-221018
The current 8 year simple performance test forces fund managers to stick to high return, low risk investments, or face various levels of censure.
The government has suggested it will increase the performance horizon to 10 years, and suggested it might adjust the performance test to reduce the negative weighting of green technology investments which currently fail the prudent investment test.
It is no mystery when a high risk new technology play fails, or when any kind of startup company fails. But this kind of risk is exactly the opposite of what most savers want in a retirement fund.
This relaxation of standards is a potential disaster for retirement savings. The main opposition party has suggested their focus will be nuclear power rather than renewables. If they stick to this commitment, large scale investment in nuclear could obliterate the value of renewable green tech, even in cases where the tech actually works, leading to a significant loss of retirement capital invested via the relaxed green investment rules.
I have no problem with people who want to gamble their retirement cash on high risk green investments. But people should have to actively choose this option, it shouldn’t be the default option.
Retired people are the most vulnerable investor group, many retirees have failing health, and in many cases do not have the health or energy to pursue fund managers who gamble away their money. Degrading the risk protections on their savings and return on investment, to satisfy the government’s desperation to show progress on their faltering Net Zero fantasy, in my opinion could turn out to be a horrible betrayal of trust.
The author of the quoted article attempts to justify this loosening of investment oversight by suggesting climate change is “a grave risk to the health, wellbeing and finances of all Australians, including retirees”. But given more than 30 years track record of failed climate doomsday predictions, I suggest the risk to retirement savings capital from speculating on green tech startups far outweighs the alleged risk presented by yet more climate doomsday predictions.
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Leftists have been trying for decades to get rid of any form of retirement fund that the government doesn’t directly control.
Leftists want to:
Control your retirement funds.
Control where you live.
Control what you drive.
Control how you heat and cool your home.
Control your appliances.
Control what you eat.
Control where you travel on vacation.
Control your medical decisions.
Control your access to scientific information.
Boy that Trump guy sure is a dictator!
When Obama used presidential orders to get around congress. He was fulfilling democracy.
When Trump used presidential orders to strike down Obama’s presidential orders, he was acting like a dictator.
When Biden used presidential orders to strike down Trump’s presidential orders, he was restoring democracy.
To the left, it’s only democracy when they win.
Australians can watch their retirement funds go the way other Woke/ESG/DEI/WEF promoting investments and companies go.
Well, this just means there will be fewer retirements, as the funds to do so won’t be there. Already too many ‘green’ investment flops to enumerate.
Bad luck for people whose health has failed…
One might ask, where are the winners In this loser sector. Point to one! Imagine your fund had bought Siemens Gamesa at 4 times it’s current sliding price.
Winners? The owners of, and early investors in the various “renewable” energy scams.
That’s not how it will be done. There will be a law for everybody to contribute to the state run retirement fund. Call it a Super Social Security. With new money always coming in, there is really no fund and no need to invest.
Rud, I believe you are in the USA. The situation in Australia with superannuation is much more complicated than Errol writes. I started my own Superannuation fund back in 1994. It cost practically nothing as I did the accounts and then got a CPA ( registered certified practicing accountant friend to audit my work for compliance and tax. In about 2004 the then federal treasurer (P Costello) wanted to encourage people who where not industry or government employees (eg self employed tradesmen) to take out superannuation for retirement. He changed some rules for self managed family funds under the control of the tax office. The important thing for me was that when retired the withdrawals were income tax free while income from funds within the superfund scheme were taxed at a maximum of 15%. My wife and I have not paid any tax for the last 10 years. Dividend imputation applies which increases returns. There is no restrictions to the type of investment (except buying real estate and renting out for personal use). One can trade shares to some extent but normally need to hold one year. No restriction on buying overseas shares-get tax back with countries such as USA were there is a tax agreement. I beat the large funds who charge some percent on assets for fund management. I have investments in oil and gas companies.
I believe there are over 2 million such funds. My daughter when she worked in a government department had her compulsory super contribution directed to our fund. People who allow their government or industry super fund (both union controlled for union benefit) should really think why they are allowing their funds to be mismanaged.
I agree. Never ever freely allow the Govt to control your money. you will lose every time. Maintain, as much as possible, control of your life and your affairs.
You can be sure that pensions for government workers will never lose a penny.
You can also be sure that union pension funds will be bailed out by government.
Everyone else, sucks to be you.
I am a huge fan of the government forcing us to save for our retirement. Damn few of us would do it if it were strictly left up to us. I am also a huge fan of the government regulating what those funds can be invested in. Safety and growth are the primary if not only consideration. That should be the limit of government involvement. They should not hold, control or have access to even a penny of our retirement. The US Social Security system is a royal mess thanks to our government.
Bob,
Immediately, you have lost credibility with “I am a huge fan of the government forcing us …”
Governments exist to express the will of the people, including those who elected them and those who did not. Current governments in many countries have increased their use of control to threatening levels. The vast majority of ordinary people like me are opposed to control and threats. We have been hurt too many times already.
For example, few of us want our governments to force us to buy a certain type of car. You might find it more rewarding to devote your efforts to smaller governments that hear the requests of the people. Geoff S
That’s okay you can disagree however I am still in favor of forcing people to save for their own retirement rather than support them on welfare in their old age. What I am against is the government controlling it.
Why stop there? If people are capable of running their own retirement, why should we assume that the are capable of running any aspect of their lives?
Mark, here is the thing, we have two issues.
Number one should people have money set aside for their later years? The answer is of course yes. The question is should they be spending their own money or someone else’s money.? They should spend their own money. Are most people responsible and disciplined enough to save on their own? I say no. If they were our financial institutions would have always been overflowing with money. They aren’t.
Number two is it a good idea for us to be forced to save some of our money today to secure our old age? Yes. We are already being forced to save currently through our FICA contributions. The problem is that our money goes to the government, they control it. They even give our money to other people. That is criminal. We can use the sane framework as SS or better yet something like a 401K. Our employers are made to withhold a portion of our pay and even pitch in a little extra and those funds are deposited in some financial institution, same as a 401K or an IRA. The important thing is that the money belongs to us individually. We don’t even have access to it. It is my money and is not available for the government to give to anyone.
It is a win win.
In Australia, It’s called a Self Managed Superannuation Fund SMSF and of course, there are rules and regulations to follow. It has to be audited every year at your cost etc. Whilst not perfect, it is a good mechanism originally designed to encourage people to save for their retirement.
aus govt does force us to have super BUT we do get a say in what private company our super is handled by. I had one via work and when I was injured was forced to cancel it. then decades later do a self funded attempt to maybe save enough for a new roof, if this crappy idea gets the nod..with the greenscammers help I might end up with one sheet of new tin
I’m not sure what you mean when you say cancel it? Do you mean you lost the money in your savings? I know there are some retirement plans that you lose if you leave your employer. My idea is that the money is yours the government can’t take it and neither can your employer. If you worked for ten different companies your contributions would still go into your account and stay there until you are eligible to withdraw it.
Bob, That happens in Australia,,, the employers pay into your super fund, but the fund is held by a company and some are govt operated, but its your choice. . You can change super companies at any time and or have more than one, but there are operational costs for each fund which will eat away at your contributions.. The real problem is that many workers are too lazy and often too stupid to look after their affairs. .
Government does most things poorly and at high cost. I don’t trust them to something so vitally important, for a reasonable cost.
They are doing it now with SS the difference is if it was done my way they would lose control over the money. I would control it the same as any private retirement plan because that is what it would be. I share your distrust of the government they couldn’t pull off a one car parade.
When these measures were first brought in my accountant explained it was just a tax. The forced retirement savings are Christmas for fund managers, ordinary people not so much.
Eric do you have money invested in a bank or insurance company or investment firm? It would be no different. Do those companies make money off of my money yes they do. That is their business. The point is we have to get it out of the control of the government.
I downloaded my SS “contributions” and the Dow Jones and S&P 500 yearly increases/decreases, and compared them to what the age 70 (maximum) benefit would be. If all my SS “contributions” had instead been invested in simple indexed mutual funds, they would pay 3-5 times as much as the SS benefits.
I then reran my little calculations for every year since 1926 when the S&P 500 started, and the one very bad year paid 96% of the SS payout.
SS is a piss-poor ponzi scheme.
Don’t forget that all the illegals coming in to the country will bring in their parents who will get SSI when they become “legal according to a declaration of the DHS”.
Anyone who is:
aged (age 65 or older);
if blind; or
disabled.
And, who:
has limited income;
has limited resources;
a U.S. citizen or national, or a noncitizen in one of certain alien classifications granted by the Department of Homeland Security (DHS)
In general, an alien who is subject to an active warrant for deportation or removal does not meet the noncitizen requirement.
SSI is $914 a month to someone who may have never paid a dime of taxes in their lives and never even lived in the US until after they turned 65 years of age.
I have no problem giving someone a hand up but not with SS money. That is why we have to take control away from the government. I am not in favor of giving a hand up to illegal immigrants. If you want our benefits come in legally.
Exactly, that is my point the government can do that with our SS and Medicare funds that is why we need a plan that takes that option away from them. You could use the same basic platform for withholds but the withholding would go into your personal account not transferred to the government. The government is really good at forcing us to do stuff but suck at running the program. Insurance companies, banks, credit unions and investment firms do a much better job. Another benefit is that they are regulated so they can’t do just anything with your money. Who is there to regulate the government? No one, that is bad no one should be self regulated.
Yes you are right. The whole point is to take control of our own plans with guard rails of course. Most people aren’t responsible or disciplined enough to save on their own. When I entered the workforce saving for old age was the last thing on my mind and remained so for many years. I was very fortunate that my employer presented us with a plan so enticing we couldn’t pass it up. The bulk of my private savings is from that plan. My employer was a hell of a lot smarter than me in that regard. I would thank him today if he were still alive.
I have more faith in people. Maybe people wouldn’t save for retirement in their first few years, but they would later because they’d hear co-workers talking about it, friends and family. The problem is that everyone has gotten so used to government doing their planning that they stop thinking for themselves.
It’s pervasive. One of my favorite examples is all those road signs warning of curves ahead, slippery when wet, bridges may be icy. If you cannot see that turn up ahead, you are driving too fast. If you don’t know to slow down in the rain, you need to pay attention to what friends and family say and get better instruction.
When the SS trust fund goes bust, in less than 10 years, SS payments will be forced to drop so that outgo matches income. At present this means that on the day the SS trust fund goes dry, SS payments will drop to about 65% of what they are at present.
Exactly. That is what happens when the government controls your money. If a private firm handled our money the way the government is handling ours now they would be put in jail. That is the problem who is there to regulate the government? No one. They are basically self regulated. Nobody and I mean nobody should be allowed to regulate themselves.
As for the SS going broke there is a reason for that. The government is pissing SS away on other programs and giving it to people who are not entitled to it. Surprise surprise we are running out of money. One other thing SS was intended to be self supporting and it has been for years. SS contributions amount to about 30% of tax revenue. That is a whale of a lot of money. What other government department provides that kind of money for its operations? None. No cuts to SS if we run short then it is time for other departments to make up the difference.
we need to take control of our savings, the government has proven they suck at it.
Generally speaking, I’m not a fan of my government forcing me to do anything.
Neither am I but they are already forcing you into SS I just want to take control of my own money. The most important thing is to take control away from the government.
You aren’t a fan of government forcing you to do something.
But you are a fan of government forcing everyone else to do what you think is in their best interest.
You don’t see the hypocrisy in that?
Not at all. I have zero confidence in the government. I don’t want them to run the program that ensures that people have money for their old age. In our old age we will either support ourselves or the government will do. It is far better that we take the responsibility to do it ourselves rather than be irresponsible and look to others to take care of us. The government might take the credit for helping those in need but it is the tax payer who is picking up the tab. You are already being forced to do what I am arguing for why not put a responsible party in charge of the program, We have already seen what a mess the government has made of it. Time to fire them.
1) You believe other people to be children who have to be forced to do what is good for them.
2) You know yourself to be a child who is unable to look after himself and want other people to make all of the hard decisions for you.
You are kind of getting the idea. I do believe that people need to see to it that they have prepared for retirement. That is the adult thing to do wouldn’t you agree. There is no reason to expect others to provide for you when with a little effort you can provide for yourself. As I have already said you are already being forced to save for old age. Why do you have a problem with putting proper, knowledgeable people in charge rather than a compromised, irresponsible government agency.
“If they stick to this commitment (adhere to low risk commitment), large scale investment in nuclear could obliterate the value of renewable green tech, even in cases where the tech actually works,…”
“even where green tech actually works”! The author certainly isn’t from the advertising sector!!
Surely there is a mechanism to stop this theft from the elderly. Here is what to watch out for. If this crooked scheme is defeated, the back door solution is to change inheritance rules to scoop up the money when an elderly person dies. Diabolical. The political set will steer their own retirement funds into a safe bet.
In my opinion the problem is the politicians in charge right now are delusional, they actually believe green energy can work, and it’s such an emergency it’s worth a few sacrifices. So they see no problem pouring other people’s money into a scheme they believe will succeed.
The reality is green energy on a national scale is a bottomless money pit, the only question is how much damage will accrue before the people kick them out of office.
Eric, that is correct. The citizens need to vote for politicians and a government that will scrap the idea that that a government can run anything well. ( No one in Labor or Greens)
However, with superannuation within present laws individuals have a choice of how they manage their savings. 1/ they can have their personal super fund as I do 2/ they can select a fund manager of their choice and 3/ they can within a fund manager can chose the type of funds for investments (eg a fund that has only cash, or government bonds, or dividend paying shares etc). Your choices are to an extant limited if you go for an industry union controlled fund manager. If one makes no decisions then it is possible that some of your money will be lost. There are accountant and financial advisors groups that can help you set up your own superannuation fund. They will manage (accounts & tax compliance) for you at a cost of about 3% of your assets or less than $5000. This is mostly less than the big super funds including government super funds.
If politicians andacademics think this is such a great idea, then they should also be happy to a mandatory allocation of minimum 40% of retirement saving contributions to “green investments”.
2008 taught us when politicians investments go bust, they just vote billions of dollars of our money to rehydrate them, and justify the expenditure with lies about saving the economy.
There is the associated risk when large amounts of voters’ retirement funds are invested in politically risky areas of giving the associated companies huge leverage over government policy for instance to maintain or increase subsidies and tax breaks and eventual bailouts, at the expense of other retirees and taxpayers.
We’re about to see this played out big time in China. Xi Jinping has put Chinese banks under the control of corrupt local party apparatchiks.
https://fairbank.fas.harvard.edu/news/how-the-party-is-increasing-control-of-chinas-banks/
Putting banks under control of those borrowing money from them is a dangerous move. Banks are already corrupted by the realization that they can lend out a lot more money than they actually have on deposit…and have done so in the past…and would do so yet if it weren’t for gov’t regulations…oops, and continue to do so as gov’ts change the bank’s lending ratio regulations….for economic stimulus purposes.
Banks don’t lend more than they have on deposit. In fact they are limited by law to a fraction of what they have on deposit.
Most of these green woke leftists never step out of their own echo chambers. And the ones that do know what’s really happening are just looking for a way to extract taxpayers money then get out before the particular investment goes bust. Bad investments, massive deficit spending and letting anybody and everybody just enter our various countries destroying our sovereignty and the rule of law. What could possibly go wrong?
If things get as bad as I think it can- these politicians may not be as invulnerable as they think they are -there will be a day of reckoning
Maybe they need to visit a certain UK zoo ?
(humor)
https://nypost.com/2024/01/24/lifestyle/potty-mouthed-parrots-teaching-other-birds-to-swear-as-zoo-hatches-plan-to-stop-problem/
“there will be a day of reckoning”
A problem is…that by the time people get out the guillotines….and use them for a few months….there is usually two or three generations worth of social upheaval because of the elimination of anyone knowledgeable in social management, before the history books manage to rewrite the debacle for school children as a struggle for freedom from oppression.
Took all my super funds out over the last few years because I thought this might happen.
Invested in house and shares.
That is one solution but there is a tax on lump sum withdrawals and then on income from your own shares. For me keeping the assets in my own super fund where withdrawals do not go into your personal income tax is better.
And speaking of investments and economics; I have been trying to figure out what is even holding the western nations economies to gather at all. I think it may be the fact that there is still massive amounts of all this borrowed money still being continuously injected into the economy. And we do benifit from all these less expensive imported goods entering our countries in greater relative numbers ( attempts to onshore seem feeble at best).
But what happens when the credit card is maxed out. And what do the western nations produce. And now we will all have to compete against millions of new “ citizens “ entering our lands ( not countries any more) some are not even here to work they just expect free stuff from Joe. And the ones that do work will out compete the real citizens that expect weekends off or overtime pay or and OSHA compliant work environment.
There’s a great book “The Rise and Fall of the Great Powers”, which charts the changing fortunes of various leading nations over the last 6 centuries.
The one thing most of the great powers had in common was military overstretch. Debt and economic damage accumulated from funding vast military commitments hamstrung the economy which funded everything, leading to collapse.
The USA has avoided the most common temptation, a military empire, but the USA is at grave risk from military expenditure, other government expenditures and accumulating debt.
IMO the best thing economically the USA could do right now to escape this well trodden path to ruin would be to pull out of NATO, and scale back commitments to only those engagements which are vital to protect US trade, and which pass a rigorous profit and loss test. Of course this does not rule out a little gunboat diplomacy to remind leaders of dangerous nations that mistreating US citizens has consequences.
At the very least the USA should demand strict pay for play from nations which need their help.
Obviously I’m only talking from an economic perspective, I’m not making any comment on the political ramifications of scaling back US military commitments.
Yes I agree. Good synopsis .
A large percentage of computer chips come from Taiwan. If China were to invade, and assuming the plants weren’t destroyed in the fighting. China would be in a position to completely control the US economy.
Pull out of Nato? Damned if they do, damned if they don’t, but Trump had it right when he told the EU to increase their military spending and stop relying so much on the USA.( Just as Australia does)
Self Managed Superannuation Fund SMSF is the way to go. You don’t need a $1M to start.
Elobeasy has SMF’s in his sights already.
I’ve been watching the Future Fund lose huge amounts of money by investing in Australian renewable companies Syrah Resources (graphite) is a prime example where they have shown ongoing financial support and the company has, after many years of operation never ever made a profit. …. Glad I am not a member and run my own super fund where I make far higher returns then any industry fund. I just don’t know how they can continually get it so wrong.