Consumers short-changed by default funds: Loane
Policy-makers are being urged to break down barriers preventing all MySuper products from competing for default superannuation contributions.
Speaking at the Australian Business Economists Annual Conference in Sydney, Financial Services Council (FSC) chief executive, Sally Loane, raised concerns over the protections provided to default funds.
Loane said default funds chosen by the industrial tribunal or through enterprise agreements on the submissions of the relevant trade union or employer organisation, had a greater correlation with the industrial coverage of the sponsoring organisation than with the fund's performance.
"An enterprise agreement can be used to prevent someone from leaving that superannuation fund," she said.
"It may cost them significantly by the time they reach retirement if they can't choose."
Loane backed recommendations made by the Financial System Inquiry (FSI) to boost competition in the default super space.
"[David] Murray recommended that all consumers should be allowed to choose their own superannuation fund and that all MySuper products be allowed to compete for default contributions," Loane said.
"These are competition reforms that should result in lower fees for consumer and improved net returns.
"Policy-makers should be wary of arguments that some funds deserve protection from competition.
"Protected incumbents always argue there is a special case that they deserve tariffs, subsidies or anti-competitive barriers to new entrants, [but] time and time again history has shown that removing such barriers tends to benefit consumers."
AUTHOR
Nicholas O'Donoghue
Recommended for you
The second tranche of DBFO reforms has received strong support from superannuation funds and insurers, with a new class of advisers aimed to support Australians with their retirement planning.
The financial services technology firm has officially launched its digital advice and education solution for superannuation funds and other industry players.
The ETF provider has flagged a number of developments as it formally enters the superannuation space through a major acquisition.
While all MySuper products successfully passed the latest performance test, trustee-directed products encountered difficulties.
