Most Australians might have at least heard of the Future Fund – Australia’s official sovereign wealth fund. But odds are it plays a very minimal role in the lives of most Australians. Let alone mental space in their investment or retirement planning.
Yet this is something we could well see in the future.
If you’re not familiar with the Future Fund, it was established in 2006 as an independently managed sovereign wealth fund. It was initially intended to help the federal government fund existing public service superannuation liabilities.
Interestingly, it was first funded with one of the government’s tranches from the sale of Telstra Corporation Ltd (ASX: TLS) shares.
What is the Future Fund?
Over the past 15 years or so, the capital in the fund has been prudently invested in growth investments by the Future Fund’s board. Just last week, we found out the Future Fund’s assets now total a whopping $196.8 billion. That was after the fund managed to bring home a 22% annual return in the 2021 financial year.
These stellar returns, the best in the Future Fund’s history, have sparked calls for a shakeup in the national superannuation retirement scheme.
This shakeup would result in the Future Fund providing superannuation services for Australians. This would be in addition to its more traditional role of strengthening the government’s long-term financial health.
These calls have come from some high places too. According to a recent report in the Australian Financial Review (AFR), Senators Andrew Bragg (Liberal) and Andrew Leigh (Labor) are both on board.
Both senators have been urging the Productivity Commission to release research that it has conducted into the performance of the Future fund against the performance of the superannuation sector.
A super Future?
Senator Bragg has reportedly already released a discussion paper on this matter. In this paper, he argued that the Future Fund should become the “default super fund for the nation’s workers”. It’s a view that’s also supported by current Future Fund chair and former treasurer Peter Costello.
“There would be huge economies of scale,” Costello told the AFR a few years ago. “The government has decided [savers’ money] should go into the super system. It could show some interest in managing it in a cost-efficient way.”
This view is backed by Senator Bragg, who also told the AFR:
I think having a simple product on the table in a compulsory system could actually be quite engaging… The Future Fund has done a good job. It hasn’t any new money for a long time and it still performs strongly. There are a lot of funds that perform very, very poorly, despite having truckloads of money coming in the door every single year.
With the government’s new Your Super, Your Future reforms recently implemented, it looks as though the government has decided on some alternative reforms for the superannuation industry at present.
But what if the Future Fund continues to deliver returns that make other super funds blush? If that happens, we can be sure this won’t be the last time we hear calls for a Future Fund super scheme.