Super system due for regulatory overhaul: ASFA
A review is long overdue for the regulatory framework of the superannuation system and any hurdles to long-term diversified investing.
That was the pitch by the Association of Superannuation Funds of Australia (ASFA) in its submission to the Financial System inquiry.
"These trends include the impact of an ageing population, the rise of individual decision-making, the increasing size of the superannuation pool and the continuing diversity and online connectivity of structures and providers," ASFA CEO Pauline Vamos said.
The current framework assumes superannuation is compulsory, that it is taxpayer-funded and that it relieves the burden of the age pension on current and future governments.
It is based on the traditional structure of a superannuation provider with a sole trust and only a few investment options and a trustee board.
"We argue that this assumption is no longer valid. The changes in the structures, the players in the industry and the way people invest all tell us that this is not the case in 2014," the submission said.
"The key driver of the changes in the industry we have seen to date is the increase in the availability of choices for individuals in relation to their superannuation, and the continued growth in individual decision making, both pre- and post-retirement. This trend is seen as continuing, rather than abating, in the years to come."
ASFA submitted that the current regulatory framework does not cover all structures, products and entities that are now part of the system. It also said the superannuation pool is now so big it needs a regulator that will look at issues and risks across the whole system.
These include risks across all three pools of money in the system including self-managed super funds and retirement, both separately and together.
ASFA also stated that requirements for the drawdown phase need to be refined.
It warned against the mandating of asset allocations for superannuation investment.
"Market forces primarily should dictate where capital flows. Any intervention is likely to lead to poorer performance and lower returns for fund members," Vamos said.
But Vamos said the Government could remove hurdles for superannuation funds from investing in infrastructure, particularly by looking at how pooled superannuation funds manage liquidity risk.
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