The superannuation system can be made more efficient through improved consumer disclosure and conflict of interest management, according to the Australia Institute of Superannuation Trustees (AIST).
AIST has told the Productivity Commission that “more consistent and meaningful consumer disclosure, together with strengthened conflict of interest management, would improve super system efficiency”.
The Productivity Commission is conducting an inquiry into superannuation competitiveness and efficiency, part of the Government response to the recommendations of the Financial System Inquiry.
AIST supports “robust” measures to test the efficiency of the super system, but warns against developing such measures before the Government has set objectives for superannuation.
“In order to measure the efficiency of the super system we first need to reach an agreement on its fundamental objective. We can then establish what the most efficient means to reach this objective are,” said AIST CEO Tom Garcia.
“Any new so-called efficiency measures must be evidenced-based and shown to improve long term net performance and the retirement outcomes for members. Efficiency in a compulsory super system is not automatically solved by greater choice and competition.”
AIST says one cause of inefficiency in superannuation is the “lack of alignment” between disclosure of fees and costs for MySuper and Choice super products.
“Poor conflict of interest management and the negative impact of related party arrangements in the retail fund sector, were also barriers to efficiency.”
“In a compulsory super system, all super funds members – whether members of default funds or choice products – are entitled to expect that the system is operating at optimal efficiency,” said Mr Garcia.