The superannuation industry needs to focus on improvement and efficiency and the complexity of the system is a barrier, according to the Financial Services Council (FSC).
In a submission to the Government’s Retirement Income Review, the FSC said the complexity of the super system were barriers to modernising legacy products and needed to be addressed to improve retirement outcomes.
It said the complexity impacted members’ capacity to make decisions at key stages and was a barrier to engagement.
The FSC said two policy responses to address there were:
- In the short term, it is vital to ensure individuals have access to affordable, independent, high quality financial advice to support key superannuation and retirement decisions; and,
- In the longer term, it will be important to work toward a simplified superannuation and retirement system that supports consumer decision-making, increases confidence and promotes engagement.
FSC chief executive, Sally Loane, said: “The focus now needs to be on how to improve the system, make it more efficient and effective, and end the scourge of multiple funds created by our inefficient default system.
This needs to be implemented as a matter of urgency by making sure people can default once and carry their fund from job to job like they do with their bank account or Tax File Number.”
The submission also said the review needed to focus on:
- The need for a clear, agreed objective of superannuation to underpin policy decisions;
- The importance of key reforms to improve the system and deliver improved consumer outcomes, including the introduction of a ‘default once’ framework and a retirement incomes covenant, to support good retirement outcomes;
- Supporting an increase of the Superannuation Guarantee to 12% by demonstrating that many Australians will have inadequate retirement incomes without the increase;
- Demonstrating that the current taxation settings for superannuation are broadly fair for Australians regardless of their income level; and
- Showing that superannuation reduces the economic burden of the Age Pension, but means testing is arguably too strict in its application.