Neil Benson00:00:01

Welcome to that super show, the podcast where we talk all things super from the inside. I'm Neil Benson.

Sarah Penn00:00:06

And I'm Sarah Penn, CEO of Mayflower Consulting. Each week we unpack what's changing in the industry, what funds are wrestling with, and how tech and regulation are shaping the landscape.

Neil Benson00:00:16

Sometimes we bring in expert guests, but mostly it's just us having a real conversation about how super is working and what could make it even better.

Sarah Penn00:00:24

Let's get into it. Welcome to that super show, coming to you from the ASFA conference.

Neil Benson00:00:34

We are live from ASFA Conference 2025. Well, strictly speaking, we're in the cloakroom of the ASFA conference, hiding in the Expo hall or just outside the Expo hall.Sarah, it's great to see you again in person. We're up here in the Gold coast this week for ASFA Con. It's great to be here.

Sarah Penn00:00:51

It is fantastic to be here. I'm very excited to see about what the next couple of days bring. But first of all, we've got a quote from a listener.

Neil Benson00:01:00

We have Andrew Jothy. Andrew, if you're listening, thank you very much. He said, Liz and I were talking about your podcast last week. We love it.We've had a few comments from listeners and it's really heartening. So if you have been listening, thank you very much.And we really appreciate your feedback and ideas and suggestions and particularly for potential guests to come and join us. So keep it coming.

Sarah Penn00:01:19

Yes, please. And if you haven't been listening, I guess you're not hearing this either.

Neil Benson00:01:23

Another bit of news, Sarah. We have a new YouTube channel for listeners.

Sarah Penn00:01:27

I know we're very excited about the YouTube channel, so you can go. And sadly, you still won't be seeing our very smiley faces, but all the podcast episodes are there, so if you.YouTube is your preferred listening medium, as they say. We have that as well too now.

Neil Benson00:01:43

So you can visit YouTube or use YouTube Music, if you're that way inclined, is your podcast player. And if you really want to see Sarah's face, everybody, please do write in and pile on the pressure.We'd love to have a YouTube channel with video sessions as well. Come on, Sarah, we can do it one day.

Sarah Penn00:02:00

One day, Neil. I'll just bring a paper bag to go with my head. We'll be fine.

Neil Benson00:02:04

Well, we've got an exciting lineup of guests at Ask for Conference. Sarah, have you seen this year's lineup? There's some pretty impressive people coming to join us.

Sarah Penn00:02:11

Yes, and I'd like to say that I have spent weeks planning which breakout sessions I'll be going to over the next two days. But in fact, Neil and I looked at it approximately one hour ago. Lots of good people, though, which is part of the thing with asphalt Conf.You always know that the speakers are going to be excellent, so you don't have to look at the speakers to decide whether or not to turn up. I'm looking forward to hearing from Daniel Molino, the Assistant Treasurer, Dan. He's a friend of the podcast now. Well, he better be.We'll see what he has to say tomorrow.

Neil Benson00:02:40

And you so Jim Chalmers is not going to make it here in person, but he will be live by video link along with Daniel Molino. Ted o', Brien, the Shadow Treasurer, is also going to be joining. Is he just here to heckle, do you reckon? The treasurer?

Sarah Penn00:02:50

I. I did see his name.I'm going to be very interested to see what they have to say for themselves, because all I've heard recently is Net zero and Barnaby Joyce and a whole lot of crazy and not a whole lot of policy.

Neil Benson00:03:04

Well, I had.

Sarah Penn00:03:05

But maybe they have some hiding in the back pocket.

Neil Benson00:03:07

Maybe they do. It was a very interesting interview with Jan Hume on the AFR podcast and she put across a pretty good front, I have to say.She took a lot of stick for the working from home policy that she put out with Peter Dutton in the run up to the election and defended that as best she could. But I don't think it was her idea.

Sarah Penn00:03:25

He was a bit of a poison chalice. Well, either someone gave her the poison chalice or no one went. Ah, Jane, let me just take that off you before you say anything out loud. Yeah.

Neil Benson00:03:35

We have Brad Jones, the Assistant Governor of the rba, joining us. We've got Carmen Beverly Smith, who's an executive director for super at apra.We've got Guy Oppelman, a former UK Pensions and Financial inclusion minister, joining from the UK as well.

Sarah Penn00:03:49

I'm interested to know what one's portfolio looks like when it's called financial inclusion. But I did note that pretty much the first thing on his bio is that he's a steeplechase jockey.So I look forward to hearing about jumping over hedges and lots of plummy private school. Well, public school England jokes tomorrow.

Neil Benson00:04:06

Yeah, very good, very good.Another friend of the podcast is going to be here, Heather Gray, the lead ombudsman for super at afca, who joined us on the podcast a few episodes ago.

Sarah Penn00:04:15

And who else have we got?

Neil Benson00:04:16

We've got.You've got the list, Katie Miller, who's the deputy CEO at Austrack, who I'm sure we're talking about financial crime and fraud and that kind of stuff as well. And Australia's I'm going to call him Australia's favorite demographer. Is that how you say it?Simon Kmacher, who was a colleague of mine at KPMG a few years ago. He now runs his own demographic consultancy. It's been a long time since I used to use Twitter, but Simon had one of the best Twitter feeds ever.Lots of great charts, maps, graphs.

Sarah Penn00:04:45

Oh I love a good chart and a good graph. I was doing some work with charts and graphs this morning actually, which made me happy.

Neil Benson00:04:52

So it's great lineup here at Asphalt. Really looking forward to the show and a great expo hall as well.I can just see them setting up outside and a lot of the big life insurance companies are here and consultancies and other participants in the superannuation sector coming to join us.

Sarah Penn00:05:06

All the usual suspects.Looking forward to talking to lots of clients and other people about what's happening in the industry and generally gossiping outrageously, which of course will definitely be part of the deal.

Neil Benson00:05:18

Any evening events you're particularly looking forward to as well.

Sarah Penn00:05:21

Sarah I'm going to the MetLife event this evening.Of course there is the usual obligatory the big the big suppliers put on events and this year because Kel her there's the big the big main event is tomorrow night instead of on the final night. So all the suppliers are having to do their events tonight. So I'm going to the MetLife one. I hear you're going to SSC.

Neil Benson00:05:41

I've got an SS&C and Chandler event this evening and some of the folks from IQ Group have offered to drag me around all the parties they're going to. The folks at IQ Group are so well connected so Joel and Mike will drag me around a few of the events this evening. So looking forward to that.

Sarah Penn00:05:55

One might say they were chaperoning you, but actually one suspects you might be chaperoning.

Neil Benson00:05:59

Then I will try and get them in a taxi at a reasonable time this evening.

Sarah Penn00:06:03

Yeah, excellent. Now our big idea for the month fortnight.

Neil Benson00:06:26

It occurred to me I was sitting at a Melbourne cup event last week and the lady beside me, she was 65.I'd never met her before in my life, but she had divulged over lunch that she was looking forward to being able to claim the Edge pension in a couple of years because she was running out of super. I asked her how she was running out of super. And she said, well, you know, I don't like to gamble, despite being at a Melbourne cup event.So she'd withdrawn all her money from superannuation as soon as she could and put it in term deposits and it was going to run out before she was 67 and able to claim the age pension.And it struck me that there's not an insignificant number of people in Australia who maybe don't have the financial literacy or confidence to remain appropriately invested and don't take any advice. Maybe don't even call their super fund. She'd never spoken to her super fund. She just withdrew.

Sarah Penn00:07:13

She doesn't have one now.

Neil Benson00:07:14

The office doesn't have one and they don't do themselves any favors and maybe they react in ways that harm their financial future. And it just struck me that is super set up to reward people like that. Can we help protect those types of folks from themselves?And should we just have a compulsory superannuation system where people don't get to choose what to invest in and there's just a mandatory investment life cycle based on your age and that's it?

Sarah Penn00:07:41

Yes.So, interestingly, because we have a default system here that defaults you into defined contribution and whatever your first super fund is, and probably into my super. For most people, that works absolutely fine.But if you look at it as a bell curve, some people at one end, the outliers at one end do exceedingly well and the outliers at the other end, like our Melbourne cup lady, do exceedingly badly. So, yes, in a spreadsheet, you.It actually works way better if you just take everyone's money and put them into sort of a future fund thing and then divvy it up at the end.The problem is, however, which has been shown by many, many governments and large companies around the world, is that everyone thinks they'll just save the money up later and they don't, and then there isn't any money to pay anybody's pension. Or there's fraud.There's been some spectacular cases in the UK actually, of corporate funds being completely whittled away by the owners who had some exciting investment opportunities themselves.

Neil Benson00:08:40

Who was the owner of. Of the Daily Mirror Group, who.

Sarah Penn00:08:44

Yeah.

Neil Benson00:08:44

Fell off the back of a speedboat in the Mediterranean.

Sarah Penn00:08:47

Yes.

Neil Benson00:08:47

I can't remember his name.

Sarah Penn00:08:48

Yeah, I can't. I can't either. But there's been a few absolute fraud.

Neil Benson00:08:51

Yes.

Sarah Penn00:08:51

Yeah, there's been a few absolute shockers. So it's that kind of thing.Of which one's worse, I guess, is sort of how I look at it, and for mine, having that system where you can actually run a reasonably sized risk of huge swathes of people having no super at all is way worse than the risk of the odd person taking it all out because they don't want to take any undue risk. I do wonder with Melbourne Cup Lady. It sounds like she did have a thought process as to why she was doing it. She was trying to avoid risk.It's just that she never got the flyer that I wrote 20 years ago when I was at Asgard and about volatility versus not having enough money. And over the long term, volatility is your friend.And not having enough money because you've stuck it all in term deposits is most definitely not your friend.

Neil Benson00:09:41

So she swapped the risk of volatility for the risk of longevity.

Sarah Penn00:09:45

Yes.

Neil Benson00:09:45

And her longevity coming to bite her. Yeah.

Sarah Penn00:09:47

Yes. And at the age of 65, there's probably quite a lot of longevity still to be had.

Neil Benson00:09:51

Still to go. Yeah.

Sarah Penn00:09:53

Yes. She'll probably live at least another 20 years, probably possibly another 30 years. And so not having the money to be able to do that.It's so disappointing when you hear those sort of stories, especially when they've already happened and there's nothing that you can do about it, or nothing you can encourage them to do about it. If she's 65 and she reckons she's not gonna make it to 67 before her super is completely gone, that's a terrible setup.And as a just guessing, if she's a single person, then she probably will struggle to make ends meet on the age pension as well. Like it's not. It's not a happy state of affairs.My Uber driver on the way to the hotel today was asking me about super because of course you say you're going to a super conference and out come the questions. And he was asking about age pension in Australia as well. Cause he's Italian. And how does that work? Is there an age pension?I was explaining that, yes, there is an age pension. And if there's two of you and you own your own home, the age pension is actually a not terrible way to live.But if there's only one of you, or even worse, there's only one of you and you rent, you'll be below the poverty line.

Neil Benson00:10:51

Yeah, you're gonna struggle.

Sarah Penn00:10:52

And I feel. Makes me feel a bit sick thinking about a Melbourne cup lady, I've got to say.

Neil Benson00:10:56

Thankfully, my Melbourne cup friend did own her own apartment, said it was lovely. So she's got that going for her. And I hope she can figure out what to do with the last remaining dollars that she has in her term deposit.

Sarah Penn00:11:08

It does strike me, I've noticed a good time, hopefully.

Neil Benson00:11:11

Hopefully a good time. I don't think either of us won anything in the Melbourne cup either, but that would have maybe solved a few problems.I have noticed that the default funds, particularly my super funds, have been becoming a little bit more aggressive or growth oriented, which is probably a better way to say it. Over the last couple years we used to think of my super funds being balanced 50, 50 between growth and defensive assets.The trend now is 70, 30 or even 80, 20.

Sarah Penn00:11:36

Yeah, nothing like that. I do actually. I think it's an excellent idea. If you've got a long time horizon, realistically you want at least 70, 30.I would say generally 80, 20, much more than that. And the way the risk works out, you don't get much extra returns for the extra risk. There's a whole lot of maths behind it.Efficient Frontier I believe is what the thing's called. I'm sure someone listening to this is laughing right now. But yes, the thing I worry that they're called balanced.The problem is they're not balanced at all. They're very skewed, which is fine because you have a really long time horizon.But if you're telling people it's balanced and not really explaining to them what it is, I don't think that's a great outcome. I was looking at super ratings returns for the last 12 months today actually for a client to do the graphs that I so much love doing.And yeah, they put My super into three brackets. The top one is like was 77 to 90% growth assets and that's for MySuper products. That's very strong. But I do actually think that's the way to go.

Neil Benson00:12:39

And if a member was defaulted into a MySuper product at age 25 and they never look at it until they go to retire 60, 65. Do you think that's dangerous then? That they've been invested in such a high growth fund for their entire career?Or is that okay for them just to take a look at it right before they retire and maybe switch into something a little bit more balanced or conservative at that point?

Sarah Penn00:13:02

Look, there's a million different thoughts about this. I mean the thing is, if you can predict the future, if one gets out one's crystal ball then.And it's not only the crystal ball of how investment returns are going to go, it's also the crystal ball of when you are going to retire. Because in this country only 50% of people choose when they retire. Really, it's much, much lower than people think.And the other 50%, it's because you get sick or your partner gets sick or you have to look after ageing parents or you lose your job in your 50s and you can't get another one.So you might think so my plan is when I am 55, I will start downgrading and increasing the lower risk component to smooth out my returns as I sail into retirement. But it's entirely possible that the point at which you retire won't be the point that you think you're going to at all.And some people, it's the other way that they retire much older than they think they're going to, either because they love their job or because something happens. Maybe you thought you were going to retire and then the GFC hits and then you don't have the super you think you're going to.The problem is it's very hard to predict what the future is going to hold.And aside from the occasional massive systemic shock like the gfc, it actually doesn't make that much difference, especially when you convert that bucket of money into a pension into an income stream.

Neil Benson00:14:19

Have we ever discussed labelling?Talking about balanced and growth and high growth and how different marketing folks at different funds use those terms somewhat interchangeably at times.

Sarah Penn00:14:30

Doesn't make me happy. I'll give you that much.

Neil Benson00:14:32

The food labeling, nutrition labelling and how you have to display how Many kilojoules per 100 grams your food has and the health rating for food overall, a similar idea for funds. So there'd be a consistent labeling across the industry for all super funds.I think the government's trying to get there, but it's not really forcing funds to use consistent labels.

Sarah Penn00:14:51

Yeah.You will find actually in most target market determinations and product disclosure statements there will be a split for each one that it does show you growth to defensive assets. So it's pretty easy to find.But yes, seeing things that are called balance that have 80% or 70 or 80% in growth assets, not only is it just patently incorrect and if I put my English language pedant hat on, I have a moment. But also it gives people the impression that something with only a medium level of risk is giving them really good returns.

Neil Benson00:15:22

Yes.

Sarah Penn00:15:23

Which then if they take money out of super and go and put it into something else that they think is balanced, will have a very different return profile that they might not realise. So yes, it doesn't thrill me. Having said that, on the list of things that I'd like to fix in super, it's not that high up the list.

Neil Benson00:15:40

Do you think there's consistency in how different asset types are categorized? For example, property. There's lots of different types of property. Commercial, industrial, residential.Do all funds categorize property investments the same way so that they're all consistently considered to be growth investments or defensive investments? Or is it up to the fund to figure out property infrastructure? Is that defensive or is that a growth asset?

Sarah Penn00:16:06

There's pretty standardized ways of allocating everything these days.And also because of the performance test, which tracks against various indices, if you're pretending things are in one bucket and they're not, you're going to track badly against the indices. You might do well in one year and badly the next.So having that correctly allocated, I would feel very confident actually that that is done properly for the big asset classes anyway. Property shares, fixed interest.I think where it starts to get a bit more exciting is the alternatives bucket, because alts now often is 10 or 12, potentially more percent of a portfolio. And that is somewhat opaque.But that is what the partially what ASIC and the government are on about with the whole thing about private markets and private credit and all the rest of it to try and shine a bit more of a light on all of that and make sure that people aren't mislabelling things. And fundamentally, that was the big issue with the shield and First Guardian issues as well, is that they were mislabelled.They were mislabelled potentially on purpose, allegedly.I'm not sure what the word here is that I should use, but from what I can gather, they were sort of touted as, you know, pretty much like a term deposit. And I went anything but. Yeah.

Neil Benson00:17:20

I had a redditor the other day was expecting his super fund in their disclosures to tell him exactly which companies his superannuation account was invested in. So, you know, 70% in international equities. Well, I want to see the list of international companies that you're invested in.And for property, I want to see all the buildings that you're invested in. And for fixed income, I want to see all the bonds that you're invested in.Do you think super funds really have a duty to disclose to that level of detail to their members?

Sarah Penn00:17:52

Absolutely not. However, there is a market need, clearly, at least for a niche segment of people who do want to know.And in fact, the way to do that if they want to, is to invest via a platform, because managed Funds do have to disclose top 10 holdings and other information.So if you invest via a platform, the investments that you choose, you can then go and look at the fact sheets and other information for each of those investments and it will tell you exactly that. So it's not as opaque as you might think.And part of the reason is it's just a pain in the butt to have yet another thing that you have to disclose and make sure that it's perfect 24 hours a day or monthly or however frequently the thing is, and I think sometimes it's better not to see the sausage factory.

Neil Benson00:18:35

Yeah, I think part of the reason that those pooled investment options exist is for people who don't want to know all the detail about how these things are made. And so if you do care, there's SMSFs and there's member directed investment options and other ways of managing your super.Go off to a wrap platform and choose your own adventure.

Sarah Penn00:18:51

Yes, go nuts.

Neil Benson00:18:53

And hopefully you don't run out of money between 60 and 67.

Sarah Penn00:18:56

Yes, well, exactly. Like on most wrap platforms, you can actually invest straight into shares as well. A lot now international too.So if you specifically want to hold Apple shares or Amazon shares or BHP shares or you, you know, whatever, you can do that through most platforms and you really can choose your own adventure.But as you rightly point out, statistically the financial literacy of people who hold self managed super funds is exactly the same as the general population.

Neil Benson00:19:24

That's all right.

Sarah Penn00:19:25

Yes.So your ability, your chances, well, not so much your ability, but your chances statistically of outperforming an entire team of God knows how many investment specialists at hostplus or Aussie super or Art or whatever. I'm not liking it, that's all I can say.

Neil Benson00:19:42

We've talked before on the show about the idea of introducing a test so that SMSF trustees have to have some kind of financial literacy certificate or something to demonstrate that they're capable of looking after their own money. But yeah, that's, yeah, an argument for another day indeed. All right, so we better go there. I think we're getting ready for drinks outside soon.

Sarah Penn00:20:02

Oh yes, we do like a drinky.

Neil Benson00:20:04

And we will maybe reconvene.Let's see if we can reconvene to the end of the ASFA conference and wrap up with a review of the show and let everybody know how good a time we had here on the Gold coast. And we'll see you next time.

Sarah Penn00:20:14

Yes, and please go and check out the YouTube channel. We'll see you soon.

Neil Benson00:20:17

Thanks very much. Bye for now. Thanks for listening to that super show. We hope today's episode gave you something useful to take back to your team.

Sarah Penn00:20:24

If you're thinking we should talk, we'd love to chat. You can book a meeting with either of us via the link in the show notes.

Neil Benson00:20:30

And don't forget to follow the show, share it with a colleague, and drop us a line if there's a topic you want us to tackle.

Sarah Penn00:20:35

Catch you next time on that super show.