More competition will lower super fees: FSC
The Financial Services Council (FSC) and the Industry Super Australia (ISA) have come down on differing sides with their response to the Grattan Report on super fees with FSC claiming more competition will lower superannuation fees while ISA called for the current process to select a super ‘safety net' to stay.
The report outlining the need for the Government to act to prevent excessive fees in superannuation accounts has been welcomed by the FSC who said a reform would drive competition, create larger super funds, and reduce duplicate super accounts.
"We have always supported open market competition in the default superannuation sector. More competition will deliver lower fees and increase efficiency," FSC chief executive, Sally Loane, said.
"Both Grattan and David Murray's Financial System Inquiry have proposed opening the default super system to competition — we encourage the parliament to support reform in this sector."
Loane said that better industry fund governance through independent directors would drive efficiency through consolidation and mergers of the small underperforming funds.
However, Industry Super Australia (ISA) said to keep a merit-based selection process for default superannuation funds is to preserve the existing process.
This is by prohibiting banks or related entities from selling default super fund services to an employer where the bank is already the main business banking provider, and ensuring retail and bank-owned funds have delivered median returns to their default super fund members before they are permitted to pay dividends from their wealth management business.
"The ‘safety net' fund selection process enables low-cost distribution based on merit and predictable cash flows for optimal strategic asset allocations and long-term investments. It is not apparent why an alternative to this selection process would be considered," ISA chief executive, David Whiteley, said.
"A selection process with a strong quality filter is required to ensure the retirement savings of the vast majority of workers, who do not choose their own super fund, are placed with a high performing fund."
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