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Default super funds 'no longer relevant'

Default super funds 'no longer relevant'

Tim Stewart
— 1 minute read

The Productivity Commission has launched an inquiry that will consider alternative models to default superannuation, with a preferred baseline of "having no defaults".

The Productivity Commission has published an issues paper titled Superannuation: Alternative Default Models, beginning a process that will see the Commission develop an alternative workable model to allocate superannuation to default products.

The inquiry is the second of three related projects to be undertaken by the Productivity Commission, stemming from the Coalition's response to the 2014 Financial System Inquiry (FSI).

The Productivity Commission released a draft report on the competitiveness and efficiency of the superannuation system in July 2016.

The final report will lead to an inquiry into the efficiency and competitiveness of the system to conclude by 2020.

Depending on the outcome of the inquiry, the government will implement a "formal competitive process to allocate new default fund members to MySuper products" as recommended by the FSI.

The issues paper released yesterday commences a concurrent inquiry that will develop a workable alternative to the current system of default superannuation.

In the issues paper, the Productivity Commission noted that some of the "original rationales" for the current default super arrangements are "no longer as relevant today".

"The system has matured significantly over the past quarter century, with accompanying improvements in transparency and compliance," said the paper.

"Australians are much more familiar with the concept of superannuation and its workings. However, retirement decision making remains very complex."

"Having no defaults" at all is the Productivity Commission's "preferred, objective baseline" for the inquiry.

"Alternative allocative models would be assessed against this baseline, and their relative performance against the assessment criteria identified," said the paper.

"All alternatives to the baseline could bring potential costs and benefits, and the assessment would need to examine who bears these costs, as well as who reaps the benefits of the alternatives."

The deadline for submissions to the Productivity Commission on the inquiry is 28 October 2016.

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Default super funds 'no longer relevant'
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