Industry Super Australia has welcomed the way in which the Productivity Commission plans to assess the efficiency and competitiveness of the Australian superannuation system, with the release of its draft report.
“Looking after the compulsory super savings of Australians requires funds to be of the highest quality and exhibit undivided loyalty to members. Today’s report identifies that member outcomes, measured by net returns and ultimately how much they have in retirement, have to be the primary focus of a well-designed super system,” said David Whiteley, Chief Executive of Industry Super Australia.
“To fulfill that objective, the system should ensure all Australians, either by choice or by default, end up in funds that are consistently high performing to maximise their savings,” he said.
“There is a moral and fiscal imperative to get default settings right. An estimated eight million workers rely on being placed in a default fund, usually by their employer, and don’t actively make a choice.”
“There is also ample evidence that many who currently make an active choice are choosing funds that do not deliver the best net returns. This is due to an overwhelming and confusing array of funds, high search costs, multiple advice channels and 40,000 investment options, many of which are designed to generate profits for companies not the customer. Where consumers have been inundated with choice there has been little sign of a corresponding drop in fees or better net returns. Today’s report notes that these are “potentially signs of unhealthy competition”.”
“The experience of the last two decades tells us that creating a safety net of high performing default funds to provide a universal level of consumer protection for all Australians will be essential in any re-design of our super system that might be proposed down the track by this Inquiry.”
“This is an opportunity to build on the best features of our existing system. However, the wrong design could push more Australians onto the age pension, lead to increasing taxes for welfare and deprive the economy of long term investment in critical infrastructure and productivity gains.”
Industry Super Australia plans to make a further submission. Submissions in response to the draft report are due by the 9th of September 2016.