The Liberal National Government has today released the final report by the Productivity Commission into the efficiency and competitiveness of Australia's superannuation system.
This report was commissioned by our Government just over three years ago. With significant changes in Australia and our workforce since the compulsory superannuation system was introduced in 1992, this review is critical to ensuring that the 15 million Australians with more than $2.7 trillion in superannuation savings are getting the best possible outcome for their retirement.
The final report found that while our superannuation system has served Australians reasonably well, there are significant issues that need to be addressed.
The Productivity Commission identified the prevalence of high fees, a significant number of unintended multiple accounts, chronic underperformance by some funds and a lack of effective competition particularly in the default fund system. The Commission has outlined 31 recommendations to improve the system.
With their proposed changes the Productivity Commission finds that members could be $3.8 billion better off each year. This would leave a 55 year old worker today $79,000 better off in retirement, and a new entrant into the job market $533,000 better off at retirement, or about double what their retirement balance could otherwise be.
The Government will carefully consider the recommendations and will await The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry's Final Report before finalising our response to the Productivity Commission's report.
Significantly, the Commission endorses many of the Government's superannuation reforms that are currently before Parliament and will deliver better outcomes for members, including:
- Preventing the erosion of accounts by having members with accounts under $6,000 or under 25 years "opting in" to insurance arrangements rather than being automatically allocated insurance and then having to "opt out";
- Automatic consolidation of low-balance, inactive accounts via the ATO;
- Improving the accountability of the superannuation system by introducing civil and criminal penalties for directors of trustees who breach the law so they can bear responsibility for misconduct; and
- Better reporting of expenses so that the funds are more transparent as to how they are spending members' money; and
- The introduction of an "outcomes test" that ensures all MySuper providers are providing outcomes that are in members' best interests.
It is time the Labor Party stopped blocking these amendments, listens to consumer advocates, independent experts and support what the Commission calls "must have" common sense reforms that put the interests of members first.
The Government thanks the Commission for this report. The report is available on the Productivity Commission website.