Australian Superannuation proposed changes and what you need to know
You might have heard a bit of talk in the news this week about the Productivity Commission’s review into the efficiency and effectiveness of Australia’s superannuation system. The overriding key objective from this enquiry, was to make the industry more efficient and transparent, and to create better outcomes for retirees so there’s less reliance on the Age Pension.
In other words, how can your superannuation be better managed by the super industry and the government so you end up with more money?
What the commission has found is that a lack of competition, governance and regulation has led to:
• A significant number of underperforming funds – including industry funds,
• People paying too much in super fees, mostly with older style funds,
• About 10 million accounts are an unintended double or triple up costing members up to $2.6 billion a year in fees and insurance.
• A lack of impartial advice to help members find the best product for them.
So, what’s the answer? The productivity commission has come up with 3 key recommendations:
• Members should be empowered to choose their own super fund.
• If a member ends up in a ‘default’ fund, no other default fund can be created for them unless they choose to switch.
• A ‘best in show’ of ten default funds is created based on the ten best performing funds net of costs and fees.
There’s a range of other important initiatives around these key recommendations that include how a fund is selected, impartial advice, comparing products, improved governance by super trustees and better, tougher regulation.
What are the likely outcomes?
The federal election will likely be some time in May and the federal labor opposition has already poured cold water over the suggested reforms. ACTU president, Michele O’Neil has also accused the productivity commission of putting banks ahead of workers – I’ve read the comission’s report and I’m not sure where she got that from. So, whatever the outcomes, you can bet that political interests will once again be the winner.
The Productivity Commission report is 700 pages long and if you’d like to read it there’s a link on our website.
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