A government review into the retirement income sector is misguided, and being fuelled by ideology rather than common sense, industry leaders say.
Treasurer Josh Frydenberg has revealed in an interview with The Australian Financial Review that he was “positively disposed to a review of the retirement income system as recommended by the Productivity Commission (PC)”.
The PC in December released a 722-page report in which it examined options that it claimed could boost superannuation savings by $3.8 billion a year.
This, the report concluded, could be achieved by: Ridding the sector of underperforming funds; Reducing the proliferation of multiple accounts; and Introducing a list of best-performing funds to ease the process of choosing a fund.
The report estimated the changes had the potential to add $533,000 to new job entrants’ superannuation by retirement, while one of the report’s key proposals – the introduction of a list of the 10 best-performing funds – could boost retirement balances by an average of $165,000 over a lifetime, the report claimed.
Just a week after the re-election of the Coalition government, Mr Frydenberg has said he will consult with his new cabinet colleagues and Treasury to follow through on the PC’s recommendation to review the sector and to do it before the legislated increases to the super guarantee from 9.5 per cent to 12 per cent.
Watch here for an overview of the Productivity Commission report
Mr Frydenberg also flagged the fact the Morrison government would resume its crusade to reduce the union and employer group representatives on the boards of industry superannuation funds.
Australian Institute of Superannuation Trustees (AIST) chief executive Eva Scheerlinck said any talk of reviewing governance structures in industry funds was “ideological and misguided”.
“If the [banking] royal commission taught us anything, it’s that independent directors do not save financial institutions from ripping off consumers and bringing the system into disrepute,” Ms Scheerlinck said.
“The equal representation of employers and employees on industry fund boards ensures a member voice at the table, and this has underpinned the consistent outperformance of the sector.”
Ms Scheerlinck cautioned that she hoped a review into the retirement savings system was not a distraction from the government being slow to take meaningful action in the banking sector.
“The government undertook to implement the recommendations from the banking royal commission but so far has only acted on those relating to superannuation,” she noted.
“We also hope that the review isn’t an excuse for inaction on moving the superannuation guarantee to 12 per cent.”
However, Ms Scheerlinck said the sector was fully prepared to work with government in the event of a review proceeding, urging the government to include self-managed super funds in any terms of reference.
Industry Super Australia (ISA) chief executive Bernie Dean said the industry super fund sector was also “prepared to work productively with the Morrison government to deliver the change that is needed to lift performance and improve member outcomes”.
But Mr Dean noted the royal commission and the PC had already “left no stone unturned” in their examinations of the finance system, and the focus should now be on fixing the problems, rather than initiating a government-run inquiry into the super sector, arguably motivated more by ideology than common sense.
“The financial security of Australians in retirement is too important to let tired old ideological battle lines get in the way of the reform that is needed,” Mr Dean said.
“Chronic underperformance and multiple [superannuation] accounts must be addressed as a priority, otherwise Australians could end up hundreds of thousands of dollars worse off at retirement.”
Mr Dean said ISA would also continue to push for action on the gender gap, and for the new government to commit to a law change that will stop “the scourge of unpaid super”.
The New Daily is owned by Industry Super Holdings