Many retail superannuation funds and those promoting self-managed superannuation funds (SMSFs) have undertaken “confusion marketing strategies”, according to Industry Super Australia (ISA).
In one of the last submissions filed with the Productivity Commission (PC) before it closed of its inquiry into the competitiveness and efficiency of the superannuation system, ISA defended the existing the default superannuation system and claimed that poor decision-making could not be solved by “simply nudging people into making choices and offering them more dashboards”.
It said suggestions contained in the PC’s draft report that better engagement could help connect employees to their superannuation was misplaced.
“Disengagement is rooted in low financial literacy and cognitive limitations, further compounded by the complexity of the superannuation system, routine regulatory change and the ‘confusion marketing’ strategies of many retail funds and SMSF providers,” the ISA submission said. “As such, disengagement is rational.”
“Poor decision making cannot be solved by simply nudging people into making choices and offering them more dashboards. Any quantitative increase in engagement by such means will be superficial, reflecting the design of the system rather than any real increase in the capacity of employees to make better choices.
ISA reinforced its support for a “strengthened industrial safety net” with respect to default super entail a “quality filter” overseen by the Fair Work Commission.