Aussie super system incomparable with world
Constant regulatory tinkering means the cost effectiveness of Australia's superannuation system is still not comparable to the rest of the world, Rice Warner head Michael Rice said.
Addressing a session at the 2014 Association of Superannuation Funds of Australia conference in Melbourne, Rice said Australia goes through annual regulatory changes, which is not standard in other regions, and said this has been going on since 1983.
"It's the direct cost of changing for the legislation, training, confusion that members have, all those in direct costs," he said.
Then there is life insurance where the underinsurance gap has been closed by raising the amount of insurance within funds.
"The life insurance premiums just within industry funds itself is the biggest sector in life insurance in Australia. It's 30-35 per cent of all the premiums received. That's quite unusual."
Rice said one of the biggest factors that differentiates Australia's super system is choice where people have choice of investment strategies and insurance options within funds.
He also said the range of fee differentials will narrow under MySuper, particularly as some of the smaller funds move into the larger funds. This is despite the complexity between funds where some offer lifecycle funds while others have a more traditional balanced approach.
"And then perhaps we'll take our mind off cost and move more to value."
Rice also said the challenge for super funds is they do not know enough about their members as most of the interaction in the past was with employers regarding money and property allocation.
"There are still funds that don't know the salaries of members. The challenge is in taking these unengaged, often apathetic people and educating them on how they can improve their position without doing very much.
"The challenge is to cost effectively get that message through to them," he said.
AUTHOR
Malavika Santhebennur
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