Industry Super Australia says the Productivity Commission’s attempt at drafting proposed reforms for the superannuation sector have “missed the mark”.
Released this week, the Productivity Commission report confirmed that not-for-profit superannuation funds outperform retail funds, and the existing industrial default system provides strong member protections.
“Yet, rather than build on the industrial default model which has produced Australia’s top-performing funds, the commission has recommended replacing it with a competitive ‘best-in-show’ process,” ISA chief executive Bernie Dean said.
He added that while the Productivity Commission had provided a welcome start for much needed reform, its consumer safeguards were inadequate and ignored big opportunities to boost member accounts.
“In essence the Productivity Commission is abandoning the proven, low-cost industrial default system in favour of a choice-first architecture that has been ground zero for consumer harm,” said Mr Dean.
“A workplace default framework is a necessary counterweight to finance sector sales tactics. It needs to be strengthened not abandoned”.
The ISA boss described the proposals to prevent cross selling as “weak” and highlighted that a process to help people out of costly and underperforming products is missing.
“A single fund for life is misguided and won’t actively connect people to the best funds at all points during their working life,” Mr Dean said.
“Reform is clearly needed but the Productivity Commission misses the mark for the greatest gains,” he said.
Industry Super supports strengthening the current default allocation process within the industrial awards system, which Mr Dean said has “protected millions of workers from being ripped-off by unscrupulous players.”
The Productivity Commission report is the culmination of a three-year review into the superannuation system’s competitiveness and efficiency.