The Australian Government should open a fee-based tender process for a small pool of default funds to combat costly overcrowding in the superannuation space, the Grattan Institute says.
The think tank believes high member fees could be addressed by an “opt out” system, where the Government selects a limited number of funds for employers pay into unless otherwise advised.
The Grattan Institute said its suggestion of a tender-based model would push fees down by forcing funds to compete for the Government’s selection.
It said the current super landscape, which works on consumer sovereignty, is ineffective because “few people can make or care to make an informed choice”.
“This approach has not worked for decades, nor has it worked overseas,” it said.
Australians fund members currently pay around $1300 in fees per year – around three times the OECD average – which the institute says the Government could feasibly cut in half.
Stronger Super reforms, like MySuper and SuperStream, have done little to push down fee pressure, it said, “because they do not sufficiently shift the nature of competition in the superannuation market”.
“The Stronger Super reforms have not changed the highly segmented market in which people who are not fee sensitive get little benefit from any fee pressure.”
