There are, at best, dubious benefits from many of the regulations currently governing the Australian superannuation industry, according to the Association of Superannuation Funds of Australia (ASFA).
ASFA has used a submission to the Productivity Commission inquiry into the competitiveness and efficiency of the superannuation industry to argue that superannuation funds are operating within a highly prescriptive regulatory and changeable regulatory environment and that some of the regulations have questionable benefits.
“The complex and prescriptive nature of the regulatory framework imposes material on-going compliance costs on the various entities in the superannuation system,” the submission said.
“Furthermore, the constant changes to the superannuation and tax settings, and to the various obligations and requirements imposed on superannuation providers and members, necessitate the expenditure of significant capital sums in implementing changes to information technology systems, processes and procedures; developing new communication materials and training staff.”
The submission then went on to point to examples of regulations which delivered dubious outcomes, citing elements such as work tests for contributions, trans-Tasman portability and the Australian Prudential Regulation Authority’s (APRA’s) insistence of utilising calendar days instead of business days.
“The threshold test for any legislative change is whether the total (social) benefits exceed the costs,” the ASFA submission said.
“Regulation that is unnecessarily complex or poorly targeted may fail this test. There are several cases in the current regulatory regime where the net benefit is questionable.”
Elsewhere in its submission the ASFA also argued for the exclusion of self-managed superannuation funds (SMSFs) from the Productivity’s assessment process and urged that MySuper and choice products should be assessed separately.
It also warned against the Productivity making any simplistic comparisons with overseas jurisdictions or on becoming too focused on fees rather than services stating that “fee-based competition can lead to lower fees, but this will not necessarily lead to higher efficiency/net returns”.
