Outdated industrial barriers stifle competition between superannuation providers and need to be removed and the default superannuation model needs to be decoupled from political interference, the Financial Services Council (FSC) believes.
Appearing before the Productivity Commission, the FSC said the current industrial system contributed to the duplication of accounts that may cost each consumer as much as $25,000 in retirement savings.
The FSC urged the PC to consider a default super model that promoted consumer engagement, facilitated the consolidation of the industry by putting subscale funds under competitive pressure, and ensured competitive pressures were retained on an ongoing basis to keep funds honest.
The FSC said the best model to achieve these objectives was a hybrid of the employee and employer choice models from the commission’s interim report, where every consumer could choose their own fund, with an enhanced Australian Prudential Regulation Authority (APRA) approval process for MySuper accreditation, and where a consumer did not make a choice as their employer could choose a default fund for their workplace.
The FSC said it was concerned that a model which relied on a Government body to approve a shortlist of preferred super funds was susceptible to political interference given the often highly partisan nature of the super industry.
FSC chief executive, Sally Loane, said: “The current outdated industrial model is predicated on the average white male working from 9am to 5pm, in the same occupation, in the same industry for 40-plus years, is disengaged from responsibility for his retirement savings and is prepared to leave its management to his trade union and employer”.
“This rust belt view of superannuation has no place in a modern financial services industry or a modern economy – where in any other product category consumers can manage their financial affairs at the touch of the iPhone,” she said.
“It has no place in a modern society where we are trying to find solutions to ensure women can save at least as much for their retirements as men.”
