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Potential changes in the super landscape

Thursday 31 May 2018


Regulation 

The ‘best in show’ list is one of the big recommendations made by the Productivity Commission (PC) in order to improve consumer outcomes.

This approach, along with other recommendations, may be a step toward staunching the current fee leak that amounts to $2.6 billion annually.

Consolidation of consumers’ accounts will also assist in stopping the $1.9 billion paid in excess insurance premiums and the $680 million in administration fees.

“At the heart of our preferred model is a single shortlist of ‘best in show’ products for all members. Members should be empowered to choose their own product, and the shortlist should be designed to make this safe and easy to do,” PC writes in their report, Superannuation: Assessing Efficiency and Competitiveness.

This shortlist approach rests at the heart of four potential approaches or models that will address what the Productivity Commission has defined as a superficially-competitive environment for default super.

It further suggests that the online portal to be operated by the Australasian Tax Office (ATO) through their My Gov portal will not only help first-time contributors choose their super but will also nudge super companies to improve engagement amongst members.

However, some concern has been expressed about the ‘best in show’ or shortlist approach.

According to Dr Martin Fahy, the superannuation industry might be altered by these changes.

“The proposal to allocate default superannuation to ten so-called “best-in-show” funds would dramatically change the retirement funding landscape, and raises questions with respect to innovation, competitive intensity and diversity,” he said.

Fahy went on to say that any changes to the system must still recognise the diverse needs of superfunds members.

 

Governance
Other recommendations include better governance and transparency at the board level, and add-on insurance with more value to consumers.
The ATO would be responsible for consolidating lost super, unless that is against the wishes of the member.

 

Regulators
The PC has also called for greater clarity between the roles of the Australian Securities and Investments Commission (ASIC) and the Australian Prudential and Regulation Authority (APRA).

The report highlighted the need for the code of conduct for the superannuation industry to reach a level where it can be enforceable.

There also needs to be greater data analytics from the regulatory end.
The report has also called for more consistency when it comes to regulatory reporting from industry. 

The final report is expected to be completed in July so that risk and compliance professionals can know what to expect from any reforms.