But the superannuation industry is worried some proposed changes could “undermine the strength” of the nation’s retirement savings system.
Revoking the licences of superannuation funds that persistently underperform is among advice in the Productivity Commission’s report, tabled in parliament today.
The report – three years in the making – also recommends Australians only be given a default superannuation fund when they first join the workforce.
Beyond that, the commission says employees should be given a list of the 10 best superannuation funds to choose from when they start a new job, as chosen by an independent expert panel.
That advice had been included in the commission’s interim report in May, and is expected to boost Australians’ retirement savings by $165,000.
Treasurer Josh Frydenberg says the report shows the superannuation system is serving Australians reasonably well but has significant structural flaws.
The government will not make its final response to the report until it’s received the final findings of the banking royal commission in February, which looked at the conduct of super funds and how they’re regulated.
But Frydenberg said there is “merit” in the idea of getting more Australians into funds that are performing well, with the current system creating a “lottery” of results for new members.
“We want to put the interests of members first,” he told reporters in Melbourne today.
“I’m not interested in the politics of the superannuation industry. I’m interested in the benefits that flow to members.”
The Association of Superannuation Funds of Australia is disappointed the commission has stuck by its suggestion Australians receive a “best in show” list of funds, believing it risks reducing competition.
“The commission’s core recommendations relating to default superannuation contributions and the nature of superannuation fund membership would dramatically change Australia’s retirement income landscape,” ASFA chief executive Martin Fahy said.
Labor, like the government, will take its time to form a formal response to the report, but shadow treasurer Chris Bowen is also concerned about the “best in show” model – saying it needs to be looked at further.
He is supportive, however, of taking strong action against funds that chronically underperform.
The Productivity Commission has also maintained advice from its earlier report to grapple with the high number of unintended multiple accounts Australians hold.
About a third of accounts, or 10 million, are accidental multiples.
Consumer advocacy group Choice said the report is a “clarion call” for lawmakers to fix the outdated system.
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