The current size of Australian super is $2.8 trillion in funds under management, or 145 per cent of Australia’s GDP. There is more than 15 million people in Australia that have a superannuation account.
The Productivity Commission found that the superannuation system as a whole has performed well; however, the report also found a lot of structural problems in the system which the government has to address.
One of the key challenges facing the government is restoring trust in superannuation in a post-royal commission world.
“The prevalence of unintended multiple accounts, pockets of entrenched underperformance and the sheer complexity of navigating the system has eroded members’ trust in the system as well as their balances,” Ms Hume said.
The royal commission has recommended ASIC and APRA regulatory roles and powers in superannuation, with ASIC becoming the primary conduct legislator.
One default account
There are 10 million accounts in Australia which are unintended or multiple accounts. With this, the cost through fees and insurance premiums is roughly $2.6 billion, according to Minister Hume.
Protecting Your Super legislation is designed to clean up or stop multiple superannuation accounts.
“It will result in millions of Australians saving quite literally billions of dollars in fees and charges. It will ultimately mean more in retirement for those members,” Ms Hume said.
Putting members first
Putting Members’ Interest First Bill 2019 requires superannuation funds to only offer insurance on an opt-in basis for those under 25 or on accounts with less than $6,000.
The government has announced its interest to establish an advocate to be a voice on behalf of members to policy discussions and work towards educating and assisting members navigate the superannuation system.
“In an industry that’s crowded with opinion makers, industry groups and lobbyists, it’s important that consumers themselves have a much stronger voice,” Ms Hume said.
“As such, the government has announced its intention to establish a superannuation consumer advocate… This will be quite a game-changer in this space.”
Much of the focus in retirement is in the accumulation phase, with very little information available for those once they have retired.
“There is work to be done to ensure that retirees’ money continues to work hard in that retirement phase. Currently, there is very little guidance on how retirees should draw down their savings when they reach retirement,” Ms Hume said.
“The government is addressing this by developing a retirement income framework which will include a covenant required for funds to develop a retirement income strategy for members.”