DAVID KOCH:
Our compulsory superannuation system looks set for a major shakeup after a new report found the current system just isn't working. The Productivity Commission has identified two key problems. The first one is all the multiple accounts that people have from changing jobs, the other is underperforming funds that strip the nest eggs of workers. Fixing these problems would mean an additional $61,000 on retirement for a 55 year old, and someone starting a job today would end up with an extra $407,000 by the time they stop working. Now the Productivity Commission has made three recommendations including workers being given one account which would follow them through their entire working life. Workers should be able to choose from a list of about 10 high performing funds identified by an independent expert panel. And underperforming super funds should merge with better performing funds. The Minister in charge of superannuation is Financial Services Minister, Kelly O'Dwyer, she joins us now. Minister, thanks for joining us, how did compulsory super get into a mess like this?
KELLY O'DWYER:
Well the Productivity Commission has blown the whistle on the fact that superannuation funds have in many cases ripped off particularly younger members and lower income members, and have not always been acting in their best interests. Some of the changes that were announced by Bill Shorten when he was Financial Services Minister has meant that there have been uncapped fees and charges, and that people have been defaulted into insurance arrangements that they don't want, or don't need, particularly when you consider that there are so many zombie insurance policies.
DAVID KOCH:
Yeah, and I know the Banking Royal Commission is going to get into superannuation funds very shortly which will be interesting, but this goes back to when compulsory super was set up, wasn't it, that unions and industry funds were all connected together, weren't they, and basically force workers into a union fund and they got some fees off it?
KELLY O'DWYER:
Well that's right. People have been forced into funds because of enterprise bargaining agreements, even when they might already have their own fund, and actually want to put their own money into their own fund. And what the Productivity Commission has said is that it needs to be fixed and fixed now, because multiple funds are costing people huge amounts of money and it's really backed in the changes that we announced in the Government's most recent Budget where we've said we want to reunite people proactively with their lost or inactive accounts.
DAVID KOCH:
Are you going to adopt all these proposals from the Productivity Commission to take it even further?
KELLY O'DWYER:
Well we've already actually done quite a number of the things that they have recommended.
DAVID KOCH:
Yep all the extras though.
KELLY O'DWYER:
We've said we'll ban exit fees, we'd cap fees, we'd make sure people weren't put into high insurance they don't need.
DAVID KOCH:
One fund for all Australians?
KELLY O'DWYER:
What we've said is we'll absolutely look at that because we think that people should have their own fund, it should follow them, rather than be dictated to by employers or unions – that's not right.
DAVID KOCH:
Minister thank you for that.
KELLY O'DWYER:
Great pleasure.
DAVID KOCH:
Big changes ahead.
KELLY O'DWYER:
Indeed.