The Productivity Commission has released a major report into Australia's superannuation system. These are its recommendations.
- Employees should only ever be defaulted into a superannuation account if they are new to the workforce or don't have an existing account.
- Employees without a superannuation account should be presented 10 “best in show” funds to choose from within 60 days. If no choice is made after that time they will defaulted into one of these 10.
- The "best in show" super funds shortlist will be judged by an independent expert panel to ensure they deliver the best outcomes for their potential members.
- All APRA-regulated super funds to undertake an annual outcomes test for their MySuper and choice offerings to be measured against clear benchmarks. When a fund falls short of these benchmarks over eight years, members are to be remunerated or, if remuneration isn't possible, transferred to better funds, overseen by APRA.
- All superannuation accounts with a balance less than $6000 or inactive for 13 months or more are to be consolidated into one account by the ATO and APRA to ensure the money goes to the right individual.
- The Australian government should require superannuation funds to publish simple and digestible dashboards for consumers to compare metrics. These dashboards will be published by ASIC.
- ATO will provide links to the dashboards through its online service.
- The Corporations Act 2001 is to be amended to ensure the term "advice" clearly refers to "advice that takes into consideration personal circumstances".
- The Australian government should evaluate all its financial literacy programs so as to better target funding to these programs and maximise their effectiveness.
- The Australian government should reassess the benefits, costs and design of the Retirement Income Covenant, a code that states super funds must continue to work in a member's interest after they retire.
- ASIC and the Department of Human Services should display on their financial literacy websites useful information for "pre-retirees" – over 55s.
- The Australian government should introduce stronger safeguards for consumers in self-managed super funds, such as the requirement for specialist training for those providing advice.
- The Consumer Data Right – the guiding principle behind the Open Banking initiative – should be rolled out to the superannuation sector.
- The Australian government should place a ban on all trailing financial adviser commissions as soon as possible and require all fees charged by super funds to be levied on a cost-recovery basis.
- Insurance through superannuation to made opt-in for those under the age of 25, or for accounts where no contributions have been made for 13 months.
- APRA should require all trustees of super funds to articulate and quantify the balance erosion trade-off determination they have made for their members.
- The Australian government should implement a binding and enforceable superannuation insurance code of conduct through APRA and ASIC.
- The Australian government should commission an independent public inquiry into insurance provisioned through superannuation.
- APRA should amend its prudential standards to provide greater prescription to how super fund trustees are to be regulated.
- All mergers between funds should be disclosed as soon as superannuation providers enter an agreement to merge.
- Superannuation fund mergers are to be given relief from capital gains tax liabilities.
- The definition of a superannuation trustee to act in a member's best interest should be amended to be clearer.
- APRA should focus more on matters relating to licensing and authorisation, to ensure high standards of system and fund performance.
- ASIC should focus more on the conduct of superannuation trustees and financial advisers as well as the appropriateness of products.
- The Australian government should clarify both ASIC's and APRA's roles, suitabilities, and strengths when regulating the super sector.
- The Australian government should immediately initiate an independent capability review of APRA to audit the authority's efficiency and effectiveness.
- The Australian government should establish a superannuation data working group comprised of APRA, ASIC, the ATO, the Bureau of Statistics, and the Commonwealth Treasury to identify ways to improve the collection and publication of superannuation-based data.
- An independent member advocacy body should be established.
- The government should require APRA and ASIC to produce a "State of Superannuation" report every two years; commission an independent inquiry into MySuper and choice evaluated outcomes every five; and once a decade commit to a full public inquiry into the superannuation industry.
- The Australian government should commission an independent public inquiry into the role of compulsory super in the broader retirement income system.
- The Australian government should create a new steering group to oversee the recommendations of the report.
This article was originally published by the Australian Financial Review. Read the original here, or follow the AFR on Facebook.
Business Insider Emails & Alerts
Site highlights each day to your inbox.