Shake up of the super system

  • Shake up of the super system

Shake up of the super system

Industry reluctance to kill off the 10 million "unintended" duplicate super accounts, created when workers shift jobs and are signed into a new fund, rips $2.8 billion a year in fees and unwanted insurance payments from the system alone, the Productivity Commission claims.

FIRST-TIME workers could retire with an extra $533,000 by 2064 under a proposed superannuation shake-up to boost returns and get rid of excess fees.

The report - three years in the making - also recommends Australians only be given a default superannuation fund when they first join the workforce.

In a long-awaited final report into the superannuation system to be released today, the commission calls for employees to be given a list of the 10 top performing funds when they start work, as well as simpler information, so they can compare the funds.

While the government isn't obliged to adopt the recommendations, an overhaul of the industry that has been under intense scrutiny in the past year seems inevitable.Today's report is likely to feed into the final recommendations of an inquiry into financial system misconduct that's due for release by February 2.Treasurer Josh Frydenberg's initial response indicates at least some of the recommendations will be adopted.

Today's report from the Productivity Commission, which includes an additional year of data, found that on average, for the 11 years to 2018, profit to member funds outperformed retail funds by around 2 per cent per year.

But Mr Frydenberg said there is "merit" in the idea of getting more Australians into funds that are performing well, with the current system creating a "lottery" of results for new members.

The Association of Superannuation Funds of Australia is disappointed the commission has stuck by its suggestion Australians receive a "best in show" list of funds, believing it risks reducing competition.

The report attributed the shortfall to "asset selection" differences, alongside conflict of interests in big finance companies - code for highly paid fund managers tipping member money into dud stocks spruiked by the company's broking arm.

"The commission's core recommendations relating to default superannuation contributions and the nature of superannuation fund membership would dramatically change Australia's retirement income landscape", ASFA chief executive Martin Fahy said.

"According to the Commission, a quarter of default funds underperform but this proposal would deny 90% of funds default status - it will remove many high-quality funds from the default system which may also disadvantage members in these funds", Ms Scheerlinck said.

Multiple superannuation funds held by people who have changed jobs make up nearly a third of super accounts and cost $2.6 billion a year alone.