The superannuation industry needs further regulation to promote efficiency for members that has not been achieved through market competition, according to super system review chair Jeremy Cooper.
While acknowledging certain sectors of the industry exhibit the characteristics of being highly competitive, Cooper said the benefits of this competition were not being enjoyed by super fund members.
“Reasonably strong competition occurs at the distribution level – that is, suppliers compete with each other for the ownership of or linkages with dealer groups who distribute fund product to consumers, or at the wholesale funds management level, or to be nominated under a particular industrial award, but not at the consumer level,” he said.
In particular, Cooper wants to see this level of competition filter through to members to lower the costs they currently have to pay.
“The corporate master trust market is one where it is sometimes argued that the benefit of rigorous competition does flow directly to members. Fund offerings marketed to employers compete primarily on the basis of cost to members,” he said.
“But, even in this area, claims about price reductions need to be put under closer scrutiny.”
To support this point, he cited Rice Warner statistics that showed that while the raw results reflected average super fund fees had dropped from 1.24 per cent in 2002 to 0.79 per cent in 2008, real figures indicated, in nominal dollar terms, average fees actually increased by over 22 per cent as a result of a 93 per cent growth in funds under management.
As such, Cooper is in favour of more regulation to drive better efficiency for super fund members.
“The review panel is convinced that the super industry needs a regulator to apply pressure to deliver the best returns to members as efficiently as possible,” he said.
“Leaving the industry to its own devices is simply not going to deliver the necessary improvement in member outcomes.”
