The Association of Superannuation Funds of Australia (ASFA) has called for a regulatory framework review of the superannuation system and any barriers to long-term diversified investing.
In its submission to the financial system inquiry, ASFA said the current framework is based on a traditional structure of a superannuation provider with a sole trust and only a few investment options and a trustee board.
The current framework assumes superannuation is compulsory, is taxpayer-funded and relieves the burden of the age pension on current and future governments.
"We argue that this assumption is no longer valid. The changes in the structures, the players in the industry and the way people invest all tell us that this is not the case in 2014," the submission said.
"The key driver of the changes in the industry we have seen to date is the increase in the availability of choices for individuals in relation to their superannuation, and the continued growth in individual decision making, both pre- and post-retirement. This trend is seen as continuing, rather than abating, in the years to come."
ASFA submitted the current regulatory framework does not cover all structures, products and entities that are now part of the system.
"These trends include the impact of an ageing population, the rise of individual decision-making, the increasing size of the superannuation pool and the continuing diversity and online connectivity of structures and providers," ASFA CEO Pauline Vamos said.
It also said the superannuation pool was now so big it needed a regulator that would look at issues and risks across the whole system.
These include risks across all three pools of money in the system including self-managed super funds and retirement, both separately and together.
ASFA warned against the mandating of asset allocations for superannuation investment.
"Market forces primarily should dictate where capital flows. Any intervention is likely to lead to poorer performance and lower returns for fund members," Vamos said.
However she said the Government could remove hurdles that discouraged superannuation funds from investing in infrastructure, particularly by looking at how pooled superannuation funds manage liquidity risk.
