15 January 2019

In response to the Productivity Commission (PC) report Superannuation: Assessing Efficiency and Competitiveness, the Institute of Public Accountants (IPA) reiterates its views made in submissions to the PC.

The objectives of the Australian superannuation system should take account of both social and fiscal considerations, according to a submission made by the IPA.

“The objectives of superannuation need to consider adequacy, sustainability and integrity,” said IPA chief executive officer, Andrew Conway.

“The IPA supports the need for performance benchmarks around returns, fees, level of service and projected income in retirement.

“There should be greater standardisation in asset allocation among funds, particularly in the default market.

“While there is currently sufficient emphasis on competition in the regulation of superfunds, analysis is required to determine whether system inefficiencies are due to a lack of competition in the marketplace or structural problems associated with the superannuation system.

“Greater financial literacy levels would mean stronger member engagement which should lead to enhanced competition.

“It should be noted that greater price transparency has not led to more competition and fees still remain high despite some slight decrease overall.

“Reforms on the demand side especially around the introduction of standardised products and enhanced transparency of information should result in improved efficiency and innovation in product development.

“However, competition and efficiency may not always be synonymous as competition which means spending on marketing to gain new members with a focus on profit-making may not improve efficiency.

“A full implementation and review of MySuper is required before further reforms are considered. The Financial System Inquiry also proposed a formal competitive process to allocate new default fund members to MySuper products in order to improve competition and economies of scale,” said Mr Conway.