The Productivity Commission (‘Commission’) has been asked to examine alternative models for a formal competitive process for allocating default members to superannuation products. Further, it will develop a workable model that could be implemented to replace the current default model.
In this submission, we argue that the structure of the current system can be improved, but that much of it does not need to be replaced. It would be far more productive to make some material changes to improve our superannuation structure to meet the Commission’s objectives rather than replacing it completely with another system. A completely new system would carry significant risks both of transition and of destroying consumer confidence.
There are many impediments to making the current system efficient and we suggest ways to remove some of them.
Some of the inefficiencies are:
• Young people are unengaged and many don’t get value from their superannuation. Their life insurance may also be of little value to many of them.
• There are too many superannuation funds which provide similar MySuper products with little differentiation; many are relatively inefficient.
• There is no mechanism for identifying and then winding up an inefficient fund.
• Too many Australians are restricted from accessing Choice due to awards and Enterprise Bargaining Agreements (EBAs).
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