Much more still needs to be done to reduce the excessive cost of superannuation, which currently stands at almost two per cent of Australia’s gross domestic product (GDP), according to the Grattan Institute.
In a submission lodged with the Senate Economics Legislation Committee inquiry into the Government’s Budget changes to superannuation, the Grattan Institute fully backed the Government’s approach around making insurance within superannuation ‘opt-in’ for those aged under 25.
“The Bill will substantially reduce the costs of superannuation,” the Grattan Institute submission said. “It will constrain inappropriate income protection, life and total and permanent disability insurance (TPD), resulting in higher superannuation balances at retirement for many Australians. And it may increase competition between superannuation providers a little, lowering superannuation fees.”
“However much more still needs to be done to reduce the excessive costs of superannuation, which currently exceed $30 billion a year (excluding insurance premiums), almost two per cent of Australia’s GDP,” it said.
Countering concerns that the Government’s policy approach would result in an increase in group insurance premium, Grattan Institute argued this was merely confirmation of the manner in which young super fund members were cross-subsidising older members.
“The current system appears to have very substantial cross-subsidies. Analysis by both Rice Warner and KPMG in submissions to this Committee claim that the proposed changes to default insurance would lead to large increases in insurance premiums,” it said. “This strongly suggests that those who are young, have inactive accounts, or small balances, are cross-subsidising everyone else. It is not obvious why it is desirable for there to be an insurance cross-subsidy for those who are old or have large balances.”
Australia’s second-largest super fund has confirmed it is expanding its presence in the UK following significant investment in the region.
A member of the super fund has approached ASIC to investigate potentially misleading or deceptive representations by UniSuper regarding the holdings of its sustainable portfolios.
The median growth fund delivered 1.9 per cent in March, adding to the “stunning” rally that has seen super funds gain 11 per cent since November.
Vanguard has affirmed its support for the current super performance test, emphasising the importance of keeping the process straightforward.
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