IPA questions objectives of the super system
The objectives of the Australian superannuation system should take account of both social and fiscal considerations, the IPA said.
Last week, the Productivity Commission (PC) report, Superannuation: Assessing Efficiency and Competitiveness, recommended a spate of changes to mend the shortcoming of the superannuation system.
In response to report, the Institute of Public Accountants (IPA) underlined that while it supports the need for performance benchmarks around returns, fees, level of service and projected income in retirement, the objectives of superannuation need to consider adequacy, sustainability and integrity.
“There should be greater standardisation in asset allocation among funds, particularly in the default market,” said IPA chief executive officer, Andrew Conway.
“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, Mr Conway said, would mean stronger member engagement, which should lead to enhanced competition.
He added that greater price transparency has not led to more competition, judging that 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,” Mr Conway said.
"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.”
He reiterated the need for a full implementation and review of MySuper before further reforms are considered.