Introduction
I would like to acknowledge the traditional custodians of the land from which I am joining you from today, the Ngunnawal and Ngambri peoples, and also the Wurundjeri people of the Kulin Nation, where you are meeting.
I pay my respects to the Elders past, present and emerging, and acknowledge any First Nations Australians in attendance today.
I appreciate the opportunity to address you today and share the Government’s perspective on the direction of the superannuation industry.
Twelve months ago, I spoke at this event and talked about the need to legislate the objective of superannuation.
A simple, clear and meaningful purpose that would enable all stakeholders to bring their full capacity to bear, and drive strong results for the members that are at the heart of the system.
That began an important national conversation.
In February, the Treasurer put forward the Government’s proposition that the objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.
The response from stakeholders has been overwhelmingly positive.
Across the board, there has been recognition of the value of establishing an objective.
There has been support for the objective statement that we have put forward.
And there has been appreciation for the benefits of building a public consensus.
This will ensure the system has clarity in its purpose so that there can be certainty in its direction.
Recently, we released draft legislation which will bring our commitment to legislate the objective of super into effect.
We’re reviewing the feedback that we have heard and will then bring forward legislation for the Parliament to consider.
This comes at a critical juncture for the superannuation system.
There are over five million Australians at or approaching retirement age.
That’s a significant cohort of members who will begin to have a different level and scope of engagement with their funds.
And they are going to expect more from their fund, with a higher level of customer service and responsiveness.
So there needs to be an urgency to ensure the system is working for its members.
Which is why I am focussed on three outcomes.
Establishing that political consensus by legislating the objective of the system.
Improving fund performance.
And lifting the customer service standard.
This will mean that policy and practice are aimed at delivering the best retirement incomes for members.
Because that is the objective of superannuation.
Superannuation performance
Now, the objective makes it clear that superannuation savings are to be preserved until retirement.
As such, members fairly expect that trustees will be held to a very high standard for their use of member funds.
The investment decisions by trustees are a significant factor in the retirement outcomes of members.
And the superannuation industry has generally done a very good job at building the wealth of its members.
According to ASFA, investment returns in super have averaged over 7 per cent per annum for the last 30 years.
Because of superannuation, more and more Australians have a secure future. Today marks the first opportunity I have had to discuss the results of the annual performance test for 2023.
The annual test of superannuation products is an important mechanism that supports better outcomes for members.
It provides transparency to members and encourages trustees to address underperformance.
And it has helped drive change within the superannuation system as most of the underperformers have exited the industry or are in the process of doing so.
This year, the Albanese Government made the significant decision to extend the performance test to the choice sector for the first time.
Until now, the performance test has only assessed the performance of the MySuper products.
In 2023, this made up 64 products.
By bringing in products from the choice sector, we have been able to test an additional 805 products.
This has improved transparency for around 4 million additional member accounts, representing about $360 billion in funds under management.
And it needed to be done.
Only one MySuper product failed the 2023 test, but over 10 per cent of tested choice products failed.
That’s not good enough.
Every year that people languish in underperforming products, they are missing out on future retirement income.
Because of our decision to extend the test, members from the 60,000 accounts with failed choice products have now been notified that their superannuation product is failing them.
This is an important achievement of the Albanese Government.
Better accountability.
Better transparency.
And better outcomes for members.
This reinforces our commitment to strengthening the superannuation system.
As the worst performers exit, the performance test will need to evolve into a more enduring test.
But the test will remain.
Trustees should be able to demonstrate the value they provide.
And that every dollar is being spent in the best financial interests of members.
Customer service standards
It is also important that trustees are held to account for their customer service.
Only last week, the AFR published research that provided a snapshot of how members feel that their fund is serving them.
On a scale of 0‑100, the average fund rated almost exactly 50.
Based on what I have seen and heard in the last 18 months, a pass score is probably about right. Maybe even a bit generous.
But it’s certainly not good enough.
This survey simply confirms the catalogue of poor customer experiences that have been revealed in the last 12 months.
In December last year, ASIC found that around 20 per cent of funds failed to consistently respond to complaints within the required timeframes.
This year, ASIC, along with APRA, assessed that funds are behind where they need to be in meeting their obligations under the Retirement Income Covenant.
All while AFCA has seen a 32 per cent increase in super complaints in the last year, with a 136 per cent rise in complaints about claim delays, including the payment of death benefits.
Unresponsive.
Slow.
And not member‑focussed.
This is a $3.5 trillion industry.
This is not a standard that members will accept.
It’s certainly not a standard that the Government will accept.
And it shouldn’t be a standard funds accept.
Improving customer service
With five million Australians either retiring or approaching retirement, funds must urgently lift their game.
For 30 years, the superannuation industry has done an excellent job of building larger and larger retirement balances for members.
And funds will need to continue to do that, into the future, for their younger members.
But they will also need to help their older members start to draw down on their savings in a way that best meets their needs.
In short, funds are going to need to do more.
One area of important need is financial advice.
The Retirement Income Review found that only a quarter of those approaching retirement seek financial advice.
That means members are making big decisions about their future without access to helpful information.
And it can lead to many retirees having a lower standard of living than they otherwise could have.
The lack of advice and information around retirement incomes is clearly the biggest gap in the advice market.
And so the Government has committed to expanding the role that superannuation funds will play in providing personal financial advice.
This is an opportunity for funds to differentiate themselves through their level of service.
I expect members will respond positively to funds that understand their needs and provide personalised solutions to make their savings go as far as they can.
Members will also get more helpful assistance in navigating other decisions, such as their tax obligations and pension entitlements.
This provides an opportunity for funds to be more innovative with how they engage members and what they offer.
Superannuation has a unique challenge because we have made it so easy for members in the accumulation phase to limit their engagement with their fund.
However, the future is likely to require more meaningful interactions between the fund and their members.
More informed and timely decisions.
In a safe, consumer‑first environment.
Which satisfy the members’ needs.
Conclusion
This is how funds will deliver income to their members for a dignified retirement.
On the Government’s side, we will continue to hold trustees to account for their performance.
That means their investment performance.
And their customer service.
The sector must lift its game to help members achieve a dignified retirement.
They must be more responsive and more innovative.
Because members have a right to expect the highest standards from their funds.
The highest standards of performance in growing their savings.
And performance in knowing and serving their members.
So that the outcomes of members are at the heart of the system.
That’s the objective of superannuation.