Former Treasurer Peter Costello has publicly supported having a single national super fund, a move which the superannuation industry says would put savings at risk.
Peter Costello, Chair of the Future Fund, was supportive of a single national administrator of super savings, and suggested the Future Fund could do the job, in a speech to the to the SuperRatings and Lonsec Day of Confrontation 2017 conference.
The Productivity Commission is set to report in 2018 on alternative ways to select default super funds. Its inquiry included looking at models overseas, including ones with a single retirement savings administrator.
Costello, in his speech , said: “Let me say that I believe that, subject to safeguards, people should be able to choose who should manage their superannuation. But the reality in Australia is there is a very large cohort of people that don’t. Their money goes into so-called ‘default funds’ that get allocated to an Industry Fund under an Industrial Award or union agreement, or to a private sector plan by an Employer.”
“Instead of the Government arbitrating between Industry Funds and private funds, there is a fair argument that this compulsory payment should be allocated to a national safety net administrator – let us call it the Super Guarantee Agency – a not for profit agency, which could then either set up its own CPPIB-like [Canada Pension Plan Investment Board] Investment Board – the SGIA-or contract it out – the Future Fund Management Agency could do it.”
Costello there would be “huge economies of scale”, fees would be reduced and it would “end the fight between the Industry and the profit sector over who gets the benefit of the default funds”.
However the Association of Superannuation Funds of Australia (ASFA) said such a proposal would put retirement savings at risk.
“In the context of the broader public debate around the efficiency and competitiveness of the superannuation system, it is almost inconceivable that anyone would countenance a government monopoly delivering the best retirement outcomes for Australians,” said ASFA CEO Dr Martin Fahy.
“What is being proposed is in essence the nationalisation of private, individual superannuation savings,” he said.
Dr Fahy said the Future Fund lacks the governance framework and administrative capabilities it would need to manage superannuation.
“It would also require faith that government could deliver more efficient, effective and reliable administration services than the private sector.”
“The reality is that transferring administration functions to a government body would create single-point-of-failure risk for members.”