Sweeping changes urged for super

Union based industry funds have shown, over recent years, that superannuation benefits can be delivered efficiently and cheaply to fund members.

The Federal government is now being urged to follow and develop that example for all Australian superannuation fund members.

That advice is contained in the third major report produced by the Cooper commission which has been reviewing Australia’s superannuation system, in depth.

The Federal government has welcomed the report, which basically urges that superannuation should be more member focused and less industry focused.

The Minister for Financial Services, Superannuation and Corporate Law,  Chris Bowen, said:”Every dollar we save in unnecessary fees and costs will help Australians’ retirement savings go further.”

There is a great deal at stake.

Australians now have an estimated $1.3 trillion invested in their superannuation.  Some experts say that this is the fourth biggest pool of money in the world.

However the report, warns that $13.6 billion of that money is in lost accounts.  Its owners cannot be found.

The report sharply criticises what it calls the “back office” operations of Australia’s superannuation funds, saying too much money is being wasted on inefficient paper based transactions.

The latest report recommends  simple, default funds, to be called MySuper, which would operate without contribution fees or commissions at all – and more efficiently run  Superstream funds.  It says that, taken together,  these measures,  could offer cost savings of $2.7 billion a year.
Mr Bowen said they could add $40,000 to the retirement savings of a worker on average weekly earnings.

Australia’s superannuation industry welcomed much of the latest report, which makes 177 recommendations in all.

Its leaders said, the industry had already been moving in the broad directions, identified by the report, over recent years.

However, there was one major exception.

John Brogden, of the Investment and Financial Services Association sharply criticised the review’s MySuper recommendations.

“MySuper legislates disinterest and apathy,” he said.

It “dumbs down super.”

“MySuper swings the simplification pendulum too far,” Mr Brogden added.

Mr Bowen said the government would consult with all interested parties before announcing its decisions.

Related stories:

1. Super benefits to rise as costs are cut
2. New, simpler super plan urged
3. Sweeping financial reforms gather pace