The Financial Services Council (FSC) said the superannuation industry can only call for the legislated 12 per cent super increase if they continue to be more efficient for consumers, otherwise the system risks "pouring cash into the current leaky bucket". 

“No one in the $3 trillion superannuation industry should oppose the sensible reforms which will benefit consumers – particularly the Your Future, Your Super Bill,” FSC chief executive Sally Loane said. 

She highlighted that retail superannuation funds support the Hayne royal commission and Productivity Commission reforms to superannuation and are working on their implementation. 

“These funds have taken a lot of medicine and do not plan to let Australian consumers down again,” she said.

“New FSC analysis on the benefits of the royal commission’s ‘stapling’ recommendation, where employees take their super account with them from job to job, like their tax file number, shows that consumers will save up to $1.8 billion in unnecessary fees in the first three years after implementation.”

However, Ms Loane cautioned on the final design of the new benchmarking methodology, which, she said, risks stapling members to poorly performing funds.

“To be crystal clear, the FSC supports weeding out underperforming funds. Duds need to go. We don’t care if they are run by a profit-making company or a trade union and employer group,” she said.

“However, the custodians of our superannuation system are responsible for investing $3 trillion in savings, and small changes in trustee decision-making can have major ramifications for the allocation of capital in the Australian economy.” 

The FSC highlighted that all sectors of the superannuation industry "want to see capital continuing to flow to asset classes that generate strong, long-term returns for consumers, including private equity, debt and infrastructure".

“The government must ensure that the proposed benchmarks accurately measure the asset classes that they purport to measure. The FSC is concerned the catch-all ‘other’ category, which is the benchmark for a range of unrelated asset classes, is too broad and risks changing trustee investment decisions to the long-term detriment of consumers, and even to the economy as a whole, as the weight of superannuation money continues to influence the market,” Ms Loane explained. 

'Complex and hard to navigate'

In a separate submission to the government, the SMSF Association pointed out that the Retirement Income Review found that the system was “complex and hard to navigate”.

The association’s CEO, John Maroney, said the superannuation system is complex. Since 1 July 2016, the legislation and complexities in administering superannuation accounts, particularly for SMSFs, has significantly increased. There are now numerous thresholds, caps, indexation methods and limits that require constant monitoring and reporting.

“With transfer balance cap (TBC) indexation now occurring on 1 July 2021, we believe it is imperative that a simpler method of indexation is implemented. Additionally, the total superannuation balance (TSB) thresholds should be streamlined,” Mr Maroney said. 

“The superannuation system is not only difficult for trustees and members, but also their advisers who must be privy to information which, in many instances, they are unable to access in an accurate and timely fashion.”

To address this complexity, the association makes three key recommendations:

• Remove or simplify TBC proportional indexation;
• Reduce the number of TSB thresholds; and
• Provide SMSF advisers and administrators access to ATO portals.

Responding to the critics, Minister for Superannuation, Financial Services and the Digital Economy, Jane Hume, said that while the current superannuation system is robust, there are holes in the system that need improving. 

Ms Hume also addressed the fees for younger members, which are "unnecessarily" reducing balances.

“Putting members’ interest bill prevented members, particularly young members, from paying for automatic insurance that is unnecessary.

“Often, these excessive premiums eroded the balances of young people that took years and years of contributions to finally increase their balance, which is not an inspiring entree into the world of compulsory super saving,” she said.

Ms Hume highlighted the superannuation covenant, which will legislate that superannuation funds are forced to guide members through retirement, as well as a superannuation super advocate body.

She also pointed out the importance of the Your Super comparison tool for members.

“The complexity of the superannuation system and the lack of simple, clear and independent information is currently holding Australians back from finding the best product for their particular circumstances,” Ms Hume said.

Despite facing its critics, Ms Hume was also vocal about the importance of stapling, which avoids creating duplicate accounts, leaving members as much as $98,000 better off in retirement.