Chant West recently submitted its response to the Productivity Commission’s draft report on superannuation. We support the Productivity Commission’s recommendations in general but we have some suggested changes that we believe will lead to better member outcomes.
Chant West recently submitted its response to the Productivity Commission’s draft report on superannuation. We support the Productivity Commission’s recommendations in general but we have some suggested changes that we believe will lead to better member outcomes.
Our submission shows that, on average, the superannuation system has delivered strong outcomes for members – both industry and retail funds have exceeded their investment objectives over the long term.
But the Productivity Commission is correct that not all members have experienced the benefits of this strong performance.
We agree with the two main problems with the current allocation of default super funds identified in the report:
unintended multiple accounts
defaulting some members into poor-performing funds.
The report has a number of recommendations to address these problems.
A summary of our views on the recommendations is shown below or read our full submission.
There is a compelling logic to have a member’s super fund follow them to their new employer.
This means the only allocation of defaults will occur at someone’s first job.
It would not be appropriate to use the current system of allocating default funds based on industry, as it will likely lead to about 50% of default allocations to Hostplus and Rest.
A ‘best in show’ list will direct members to very good funds.
Funds that are specialised for certain industries, or constructed for certain employers, could be shown alongside these funds, not as defaults but as additional options.
Choice will be the main game if the ‘best in show’ model is introduced, and funds will need to do more on promotion, marketing and brand.
The system will work if there is genuine engagement with employees through a centralised online service. This is possible if it is linked with TFN declarations and the myGov website.
An introduction of these changes in the near future may interfere with some key industry innovation, so the start of any assessment should be delayed until at least July 2020 (probably even longer).
The expert panel will have a very difficult job to assess complex data sources that are difficult to quantify and require detailed knowledge of the industry, so the panel will need expert input.
The MySuper test should be significantly strengthened by APRA based on its outcomes test so that only super funds that deliver very strong member outcomes have a MySuper licence and can accept default contributions.
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