Consumers short-changed by default funds: Loane
Policy-makers are being urged to break down barriers preventing all MySuper products from competing for default superannuation contributions.
Speaking at the Australian Business Economists Annual Conference in Sydney, Financial Services Council (FSC) chief executive, Sally Loane, raised concerns over the protections provided to default funds.
Loane said default funds chosen by the industrial tribunal or through enterprise agreements on the submissions of the relevant trade union or employer organisation, had a greater correlation with the industrial coverage of the sponsoring organisation than with the fund's performance.
"An enterprise agreement can be used to prevent someone from leaving that superannuation fund," she said.
"It may cost them significantly by the time they reach retirement if they can't choose."
Loane backed recommendations made by the Financial System Inquiry (FSI) to boost competition in the default super space.
"[David] Murray recommended that all consumers should be allowed to choose their own superannuation fund and that all MySuper products be allowed to compete for default contributions," Loane said.
"These are competition reforms that should result in lower fees for consumer and improved net returns.
"Policy-makers should be wary of arguments that some funds deserve protection from competition.
"Protected incumbents always argue there is a special case that they deserve tariffs, subsidies or anti-competitive barriers to new entrants, [but] time and time again history has shown that removing such barriers tends to benefit consumers."
Recommended for you
Financial Services Council chief executive, Blake Briggs, is urging Minister for Financial Services, Stephen Jones, to take advantage of the QAR opportunity to reduce regulatory duplication and ensure advice is affordable.
Former chair of the House of Representatives’ Standing Economics Committee, Tim Wilson, is planning a return to politics after losing his seat in the 2022 federal election.
Morningstar is going to offer research ratings of funds in the $3.5 trillion superannuation sector for the first time in response to demand from financial advisers.
Treasurer Jim Chalmers has opened a consultation into the design of the annual superannuation performance test, canvassing views on a range of reform options.
