Industry Super Australia has urged government to act quickly to remove inefficiencies from superannuation before the scheduled guarantee increase, rather than delaying increases further.
Speaking to The New Daily, ISA chief executive Bernie Dean said 2018’s banking royal commission had done a “very good job” of identifying problematic areas within the super system, and the industry was keen to work with government to rectify those swiftly.
“The government must move quickly to tackle chronic underperformance, or risk condemning millions of Australians to dud, underperforming funds that leave them worse off at retirement,” he said.
“More must also be done to eradicate multiple accounts and stop people’s super balances being eaten away by fees and premiums.”
However, Mr Dean said the nation “cannot afford another delay” to already-scheduled increases in the super guarantee, currently set at 9.5 per cent of employee’s pay and set to increase to 12 per cent by 2025.
“Any attempt to wind back the proposed increase or freeze it altogether would not only affect Australians’ quality of life at retirement, it would increase the burden of the age pension on the budget,” he said.
The Coalition froze the super guarantee at 9.5 per cent in 2015, and members are estimated to have cumulatively lost almost $40 billion in retirement income since then as a result.
“ISA modelling shows that the average worker has already missed out on almost $100,000 in super as a result of the continued delays to the super guarantee since its inception,” he said.
Mr Dean’s comments come after Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume, told the Sydney Morning Herald it would be “immoral” for government to increase the super guarantee unless those inefficiencies identified by the royal commission were removed.
Industry supports efficiency reforms
Sally Loane, chief executive of the Financial Services Council (the association representing retail and bank-owned super funds) also supported efforts to make the retirement savings system more efficient.
The proliferation of so-called ‘zombie accounts’ – unnecessary duplicate accounts created when an employee changes jobs and moves to a new fund without consolidating their savings – was a particular concern for Ms Loane.
“The Productivity Commission identified 10 million of these ‘zombie’ accounts, which are costing Australians $2.6 billion in fees every year,” Ms Loane said.
“This enormous waste is indefensible in a system which makes it compulsory for people to put 9.5 per cent of their weekly wages into super.”
Similarly, Association of Superannuation Funds of Australia chief policy officer Glen McCrea told The New Daily that efforts to make the system more efficient and ensure members’ money is put to good use are a positive for Australians’ retirement.
“ASFA supports recent initiatives to increase efficiency and improve outcomes for members – including significant investment in technology, reducing rollover and transaction processing times, and continuing to reduce the incidence of multiple accounts,” he said.
However, Mr McCrea cautioned that “an overwhelming majority” of Australians still want the super guarantee to move to 12 per cent, citing a poll conducted by research firm CoreData.
“It found around 80 per cent of respondents across a range of demographics either support or strongly support the increase,” Mr McCrea said.
The New Daily is owned by Industry Super Holdings