Increasing competition between super funds could save $292 million a year in fees, says the Financial Services Council.
The FSC has released research, by Deloitte Access Economics, which indicates increasing competition among MySuper super funds could reduce total administration fees by 13%, or $292 million a year.
FSC CEO Sally Loane said: “The evidence is clear. If competition reforms are introduced to allow all funds to compete in an open and transparent market, fees in superannuation will fall dramatically.”
“While we always acknowledge the criticality of value and returns from super funds, fee reductions will greatly improve the ability of Australians to save more for their retirement and consequently improve their standard of living in retirement.”
The recommendations in the report include expanding the ability of employees to choose their own default super fund and allowing all employees under Enterprise Agreements to be able to switch funds.
“Despite the significance of default accounts, the default system is not designed with competition and choice in mind. This presents an opportunity for important micro-economic policy reform that could have a significant impact on Australians’ income in retirement,” says the report.
It goes on to say that under increased competition those funds with higher administration fees would no longer be attractive to consumers.
“Currently this is not what is observed, amongst MySuper products there are variations of well over one percentage point between the lowest and highest fee products.”
The $292 million figure is based on a narrowing of the difference between the highest and lowest administration fees of MySuper products.
The release of the report comes shortly after the Government issued the terms of reference for the third stage of the Productivity Commission’s review of the competitiveness and efficiency of the superannuation system.
The FSC, which in part represents the wealth arms of the major banks, has long been campaigning for increased access for retail super funds to default fund status.