Proposals to change the current default fund system would result in fewer players, more concentration and less price competition, Investment and Financial Services Association (IFSA) chief executive Richard Gilbert said.

A report by the Australia Institute and Industry Super Network (ISN) proposed a set of criteria for default funds for people who did not exercise choice of fund. These included capping fees and prohibiting the payment of ongoing financial advice fees including commissions.

Gilbert said all these policies would drive out competition and concentrate the market.

"My members in the retail and corporate sector feel they are being driven out of the default market ... the ISN report needs to look more closely at the indicators of success and for many the indicator of success is cost," Gilbert said.

New research by IFSA and Rice Warner Actuaries revealed fees have declined across all sectors since the introduction of super choice in 2005, barring small corporate funds and self managed super funds.

"We estimate that the overall fees for the whole superannuation industry averaged 1.21 per cent as a percentage of assets under management," Rice Warner Actuaries director Michael Rice said.

"This compares to 1.26 per cent in 2006 and is very different to the 2 per cent figure used by some industry commentators."
Minister for Superannuation Nick Sherry dismissed the statistics.

"Big deal - I do not take any solace from such a small reduction in fees. It should be far lower in our system of choice," Sherry said.

"Given a system of our size, the cost of 1.25 per cent is not good enough. It needs to be lowered to less than 1 per cent," he said.

Sherry said an effective default solution was required to minimise losses made by those who do not make an active fund decision.