Public commentary on the default superannuation market has been largely focused on a flawed assessment of Chile’s competitive auction model conducted by the Grattan Institute which has never admitted its mistake, according to Financial Services Council senior policy manager, Blake Briggs.
Writing on a column to be published in the next print edition of Super Review, Briggs has pointed to the current review being undertaken by the Productivity Commission and the degree to which the Grattan Institute assessment has continued to be a factor,
“… the market has unfortunately focused on a proposal of the Grattan Institute for a competitive tender model – one that is deeply flawed and based on poor evidence,” he said.
“Chant West demonstrated in 2014 that Grattan’s assessment of potential cost savings from Chile’s competitive auction model was wrong. It compared Chile’s administration fees only with the sum of Australia’s administration and investment fees for MySuper Products. Grattan has never admitted its mistake, and has continued to advocate for the flawed tender model,” Briggs said.
At the same time as advocating further competition in the compulsory superannuation market and welcoming the Productivity Commission’s suggestion of a “no default” baseline for discussion purposes, Briggs argued that the current review should not delay the Government acting to reactivate legislative proposals which lapsed with the calling of the recent Federal Election.
“Reforms introduced to parliament prior to the 2016 election lapsed when parliament was prorogued, including a requirement for trustees to appoint independent directors and measures to extend the right to choose a superannuation fund to all consumers” he said.
“It is appropriate and advantageous to consumers for the Government to action these reforms whilst the PC review is underway. After all, a 2020 ‘health check’ would only be meaningful in an environment where new consumer protections are in place and all APRA-approved MySuper products have been allowed to compete on a level playing field.”
