The Australian Institute of Superannuation Trustees (AIST) has made a second submission to the Productivity Commission’s alternative default superannuation models paper, questioning the need to change the current default selection process.
A majority of Australia’s workforce use default super funds, AIST said, meaning changes to the current default super arrangements will affect “millions of Australians” and making it critical that the Productivity Commission focus on member outcomes.
“In its important deliberations the commission should at all times ensure that the best interests of fund members have primacy,” the industry body said.
“The criteria for assessing alternative default models must have a principle criterion of members’ best interests.”
Current default super funds have consistently delivered for their members, AIST said, and the current system should be used as the baseline for comparison with alternative default arrangements rather than the commission’s proposed no-default baseline.
“Existing default funds have consistently, over a long period, delivered significantly superior returns and appropriate services to members. The selection of appropriate default funds can make a difference of tens of thousands of dollars in retirement balances.
“There remains an overwhelming case for the continuation of default fund arrangements that are efficient and work in the best interests of members,” AIST said.
Additionally, AIST cautioned that changes the default selection criteria have the potential to “fuel uncertainty” and undermine confidence in the superannuation system, which could in turn “lead to significant costs that are ultimately passed on to members”.
“Changes to the existing default system, which we argue has a solid track record, are potentially an enormous undoing of Australia’s retirement incomes system, affecting not only members and super funds, but also the wider financial services sector,” AIST said.
“We urge the commission to consider these impacts when reviewing potential alternate models.”
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