The Super Sector Isn't Broken, But It Does Need To Change
The Productivity Commission has released its final report into the super sector, calling for significant changes to the way the industry operates.
Fifteen million Australians invest in superannuation, and most young people who don't will one day. So this is a policy area our politicians make determinations on that matter to most of us.
It is the most comprehensive investigation into super in our nation’s history. Paul Keating made super compulsory 26 years ago, and the quantum required to be saved and invested has steadily grown since then.
The system certainly isn't broken. In fact, Australia leads the world when it comes to taking pressure off state-funded pensions.
But the three-trillion-dollar super sector does need to change to keep up with the modern workforce.
Workers today are much more mobile than in the past, changing jobs regularly and working part-time and casually more often than in the past.
The rise of contracting leaves a wider cohort of people without super than might have been the case in the past.
The current system doesn’t adequately factor all of the above in. As a result, too many Australians have multiple super accounts, being eaten up by fees and insurance premiums they do not need.
Multiple accounts and excessive fees mean Australians are wasting nearly four billion dollars each year.
There isn't enough disclosure of those fees according to the PC report.
A typical member of a generic super fund would be $165,000 better off in retirement if they put their super in a high performing fund rather than one of the lower performing funds assigned to them by their employer.
Which is why one of the key recommendations in the review is to have an expert panel pick the top ten performing funds to provide information to super investors to help them get the most out of their savings.
Another key recommendation calls for workers to default into just one fund linked to their tax file number, to prevent multiple accounts. The regulators come in for criticism, called out for not doing their jobs properly. The two regulators targeted are APRA and ASIC.
APRA was also criticised recently by the ACCC for how it has overseen the banks.
Funnily enough, the author of the PC report, Karen Chester, moves to ASIC at the end of the month. The Banking Royal Commission also attacked both regulators.
The super system certainly needs to be more flexible, and the recommendations will help facilitate that.
But there are no guarantees either side of politics will embrace all of them, despite welcoming the report. Powerful vested interest groups -- in finance and the union movement -- will fight to maintain their control over your super.
The Treasurer and the shadow treasurer both did media conferences to respond to the report, but both Josh Frydenberg and Chris Bowen were more interested in teeing off on one another than they were in responding to the actual report.
Peter van Onselen is Network Ten’s Political Editor.